The Treasury Committee has launched a call for evidence in respect of four areas: VAT and the tax gap, VAT and Brexit, VAT and business and VAT and good tax policy.
The VAT gap is the difference between the amount of VAT actually collected and the total VAT liability and for 2016/17 was estimated at 9% which equates to £12 billion. The UK’s date for leaving the EU VAT regime has been potentially set for 31 December 2020
This purpose of the inquiry is to enable the committee to examine:
- What is causing the VAT gap, what role advisors play and how HMRC could better deal with it.
- What the opportunities, challenges and concerns are in relation to Brexit
- How to improve VAT problems for businesses.
- Do the VAT rules support growth, provide certainty and stability and are they coherent and practical.
Written Submissions are invited to any of the following questions by 31 May 2018 and can be made here.
Questions:
VAT and the tax gap
- What are the root causes of the UK VAT gap and how might they be addressed?
- Is government policy-making sufficiently responsive when a weakness in the UK VAT regime is identified?
- Are there ways in which HMRC’s compliance strategy for VAT could be better targeted to close the VAT gap? Could its resources be deployed more effectively?
- Do developments such as the growth of on-line trading or changes in the labour market reflecting modern working practices require a new approach to VAT compliance?
- Is HMRC’s approach to large, medium-sized and small businesses appropriate for the nature of the risk to the VAT element of the tax base that each sector poses?
- In what ways is the tax base in the UK vulnerable to exploitation by those determined to circumvent VAT rules, push boundaries or develop aggressive VAT planning arrangements? How might either the law or HMRC’s processes and procedures be improved to reduce that vulnerability?
- What role do advisers play in encouraging or facilitating aggressive VAT planning arrangements? Do businesses, tax advisers and professional bodies have concerns about the nature of the advice given by some practitioners?
VAT and Brexit
- What opportunities and challenges for the UK VAT regime are presented by the UK’s exit from the European Union?
- What are the chief concerns for HMRC and for business?
- What impact will Brexit have on HMRC’s efforts to reduce the VAT element of the tax gap?
VAT and business
- What aspects of VAT (either process or design) cause the biggest problems for businesses? How might they be improved?
- In 2015-16 over £3.5 billion was lost due to mistakes in VAT returns according to HMRC figures? Will Making Tax Digital be sufficient on its own to reduce error and significantly improve the collection of VAT? What other action would help businesses to get their VAT returns right?
Can disagreements between HMRC and a business about how much VAT is due be resolved quickly and fairly? If not, what are the obstacles and how might they be overcome?
VAT and good tax policy
How does VAT measure up against the principles that tax policy should:
- Be fair
- Support growth and encourage competition
- Provide certainty without regular recourse to the courts - which in turn requires legal clarity, simplicity and targeting (so that taxpayers are clear whether or not they are liable for particular types of charges to tax
- Provide stability, with minimal change unless there is a justifiable economic or social basis
- Be practicable, meaning that a person’s tax liability should be easy to calculate and straightforward and cheap to collect; and
- Be coherent, with new provisions complementing the existing system rather than conflicting with it.
Is the process of making VAT policy sufficiently open to scrutiny and debate? Are there ways in which the current process can be improved?
