According to Reuters, taxes collected from VAT have risen from £98 billion to £157 billion in the last year, which contributes to the growing trend seen in the past ten years.
VAT now makes up 22 per cent of HM Revenue and Customs’ (HMRC) total tax receipts, which is a new record.
VAT is also the third biggest supplier of Government revenue and the fastest-growing tax of the Big Five taxes, with a growth of 42 per cent in the last decade.
What are the Big Five taxes?
The Big Five taxes for income to HMRC are Income Tax, National Insurance, VAT, Hydrocarbon Oil (Fuel Duties) and Corporation Tax.
Reuters have also reported that HMRC is expected to focus on incorrect VAT payments, as VAT receipts have become more valuable to the Government and will be prioritised as a result.
Will this have an impact on my business?
HMRC have reason to believe that around £3.9 billion in VAT payments have not been paid by over 2,000 companies between 2021 and 2022.
The tax authority was given an extra £292 million in funds to address tax underpayments in the Autumn Budget in 2021.
Large businesses could, therefore, see a rise in investigations as the Government seeks a return on their investment.
If HMRC discovers an underpayment on VAT, companies could face a penalty of 100 per cent of the money owed plus interest rate charges, which have also risen recently.
Due to this, VAT must be paid correctly and consistently in line with Government guidelines.
It can be tricky to ensure it is not overpaid or underpaid as VAT rules are complex and can be different depending on the jurisdiction.
For advice on VAT, contact our team today.
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