Question to the HM Treasury:

To ask the Chancellor of the Exchequer, whether he has made an assessment of the potential merits of (a) raising the VAT threshold and (b) implementing a smoothing mechanism to reduce tax and administrative barriers to opening outside peak season for businesses in communities reliant on tourism.

The Government recognises that accounting for VAT can be a burden on small businesses. This is why we maintain the highest VAT registration threshold in the OECD, and when compared to EU Member States, at £85,000. This keeps the majority of UK businesses out of VAT altogether.

Views on the VAT registration threshold are divided and the case for change has been regularly reviewed over the years. While some businesses have argued that a higher threshold would reduce administrative and financial burdens, others contend that a lower threshold would provide a fairer competitive environment.

Whilst the Government keeps all taxes under review, we announced at Budget 2021 that the VAT threshold will be maintained at its current level of £85,000 until 31 March 2024.