Panellists

• Stephen Relf, Technical Manager, Tax, ICAEW
• Ed Saltmarsh, Technical Manager, VAT and customs, ICAEW
• Ruth Corkin, Principal, VAT and Indirect Tax Advisory, Hillier Hopkins

Producer

Ed Adams

Transcript

Stephen Relf: Hello and welcome to The Tax Track, the podcast series from ICAEW, where we explore the latest developments in the world of tax. In this episode, we’ll be talking about the problems with VAT and why ICAEW will soon launch a new campaign, How to Fix VAT.

Ed Saltmarsh: A lot of the strangeness that we built into VAT just gets harder and harder to remove because people are so used to it.

Ruth Corkin: People are already paying more VAT than they think they are. It’s just that when you start to tax what people consider to be essentials, it gets very, very sensitive.

SR: I’m Stephen Ralph, Technical Manager, Tax, at ICAEW. Regular listeners will note that this month, we are giving Lindsey a break, and instead, I’m joined by two people closely involved with the campaign, both of whom have an encyclopaedic knowledge of VAT. First, my colleague at the Institute Ed Saltmarsh, Technical Manager for VAT and Customs, and second, our special guest, Ruth Corkin, currently Principal, VAT and Indirect Tax Advisory, at Hillier Hopkins, and previously a Senior Policy Adviser at the Office of Tax Simplification. Welcome to you both.

SR: VAT was introduced in the UK some 50 years ago and is now the UK’s third largest source of tax revenue, behind income tax and National Insurance contributions, but it can be complicated and costly to comply with, and that’s despite previous efforts at simplification, including by the Office of Tax Simplification in 2017. And that leads us to ICAEW’s campaign, How to Fix VAT. Ed, could you tell us more about the campaign?

Ed Saltmarsh: Absolutely. So VAT is a really important tax in the UK, as you’ve just alluded to. In fact, most people pay more VAT than they do income tax. It raises a lot of revenue, around £169 billion last year, but it doesn’t get that much attention. I think that’s partly because it’s not that visible, and partly because a lot of people don’t really understand it. So the ICAEW campaign is aimed at educating people about VAT, whether that’s our members, the general public or policymakers, and exploring how VAT can be improved, because it’s really important that VAT works as well as it can for everybody. So there will be a series of articles as part of the campaign looking at various aspects of VAT. And there’s going to be some social media content as well, some short video explainers, that kind of thing. And at the end of it all, we’re going to have a conference at Chartered Accountants’ Hall in London on 18 June 2025.

SR: For that content, there will be a hub page on ICAEW’s website. And as Ed said, we’re going to have loads of content in there, from articles to videos and to a quiz, I believe, as well. We will be referring to lots of that content as we go along, but please do refer back to it when it’s launched for more information. So we have picked out a few problem areas to discuss today, and we’re going to start with the VAT registration threshold. This is the test for determining if a business must register for VAT and so charge VAT on its supplies. Now the current threshold is £90,000, and I believe that’s the joint highest in the OECD. Now, Ed, why is this causing problems for UK businesses?

ES: Well, the problem that we are seeing is that businesses that are close to the VAT registration threshold are, in some cases, actively managing their turnover so that they don’t cross that threshold. HMRC ran a survey a few years ago which found that 20% of businesses just below that threshold are taking active steps like closing their business one day a week, or going on holiday for a whole month of the year, and actually turning down work, which is really bad for those businesses because they’re not able to grow, and that has obviously wider ramifications for the whole economy.

SR: Now, I did mention that it’s the joint highest in the OECD. How does it compare to other countries, in Europe for example. Is it significantly higher?

ES: Yeah. So the average threshold in Europe is around £30,000. And actually, some countries in the EU don’t have a threshold, you have to register as soon as you start.

SR: So it’s quite a significant difference.

ES: Yeah. It’s very different to most of the rest of the world, really. And is a lot higher.

SR: Presumably, we started at roughly the same sort of threshold some 50 years ago, and then a decision was made to increase ours, or perhaps in Europe, to decrease theirs, perhaps?

ES: It used to be the case that the VAT ratio threshold would increase almost every year in line with inflation. There have been a few occasions where it increased more than that in an active attempt to simplify VAT for small businesses.

SR: Right.

ES: So the registration threshold itself is meant as a simplification measure, because really small businesses, those trading under £90,000, don’t have to comply with that.

SR: So, in that case, is the answer to go higher still?

ES: There is an argument for that, and there are some statistics that show that actually a vast majority of revenue from VAT comes from the largest businesses. Seventy-five percent of the VAT revenue comes from businesses with a turnover of over £10 million. So you could significantly raise the threshold and take all these small businesses out of VAT, but I think the problem with that is you’re just moving the problem. And the higher the threshold is, the bigger that cliff edge. Businesses will be more willing to restrict their turnover to, say, £250,000 than they might be to restrict it to £90,000 and again, more willing to restrict it to £90,000 than they would be to restrict it to, say, £30,000, so the higher that threshold is, the bigger the problem. And you’re just moving it by increasing it.

SR: So as well, as we mentioned, it is much lower in other countries. Is there a case then for lowering it, or have we got the same sort of issues?

ES: I think you never, you never entirely remove that cliff edge, unless you don’t have a threshold. But I do think that the lower that threshold gets, the smaller the problem with the bunching of businesses below that threshold. And also, lowering the threshold would raise revenue, which obviously is at the top of people’s minds at the moment.

SR: Okay, so perhaps the issue is having a cliff-edge threshold at all. Now, a different approach then may be to have a mechanism that is intended to smooth that transition into VAT registration. Ruth, I think the OTS [Office for Tax Simplification] has looked at this in the past, starting with the merits of an existing scheme, the flat rate scheme. Can you explain how the flat rate scheme works and why it might be relevant for this conversation?

Ruth Corkin: Okay, so the flat rate scheme is designed for small businesses. They have turnover of under £150,000, and basically they charge that as normal to their customers, but account for that to HMRC at a fixed percentage based on industry norms, the amount of input tax or VAT that they could claim normally, and sort of sectorisation, B to C, B to B, so they don’t claim input tax in the same way, they just pay a flat rate. They don’t need to keep such detailed accounting records and it is beneficial for most. It’s not designed to be financially beneficial, it’s designed to be administratively beneficial, and there has been a lot of fraud around it, so in 2017-18, they introduced the limited cost trader concept, which meant that you had to prove that you purchased a certain amount of goods in order to benefit from a lower rate. And that meant that a lot of businesses decided to leave the flat rate scheme, so it does have its disadvantages.

SR: Interesting to know that it is intended as a simplification. Does it do the job, in that case, then?

RC: It does from a VAT perspective, but if you need to keep more detailed records for self-assessment or corporation tax, then you sort of have to duplicate the effort. So it works from a VAT perspective, but you still need to keep some detailed records for other taxes.

SR: Okay, so I guess if you look at VAT in isolation, yes, but that’s not really the case, is it? Businesses have other tax obligations.

RC: They do, and then monitoring whether or not you’re still entitled to use it and whether you need to leave is something they actively have to do.

SR: And as well, Ruth, you explained it beautifully, but I still struggle to understand it, so I imagine a lot of businesses struggle with the calculations, perhaps, as well, and determining whether they should or shouldn’t use it?

RC: Yeah, and you know, I’ve had clients who have been on the flat rate scheme for ages and not monitored their upper turnover threshold, and then find that HMRC has back-assessed them from when they should have left the scheme. So it works, and it works for a lot of businesses, particularly the B to C ones, they don’t have to worry too much about keeping records, etc – you know, they might be sole proprietors, they may be very small businesses without the resources – but you do still have to actively monitor your turnover.

SR: And we have seen some figures of late as well, which have suggested that fewer businesses now use it than before. So I think the percentage of eligible businesses using it in 2017 was around 25% and that’s dropped to around 14%. Now you have mentioned one possible reason for that, with that change in the rules, but could it also be that it just isn’t working as effectively as it was before as a simplification measure?

RC: I think the greater reason is the change in the rules that saw a lot of people drop off the radar of the flat rate scheme because they used it to be financially beneficial rather than administratively beneficial. And actually administering those rules is complex. So, you know, you pay a percentage of 16% over to HMRC, and you charge 20% to your customer, so you’ve only got 4% to play with and administering, you know, whether or not you have the right amount of goods is actually very difficult. We’re seeing a lot of that at the moment in, say, the last-mile delivery sector, where people are registering, but administering the flat rate scheme for them is really, really difficult, even with the use of technology to do it.

SR: Okay, so that was one of the options the OTS looked at as a smoothing mechanism. Did you consider any more? Did the OTS consider any more?

RC: Yeah, a number of different ones were considered. Phasing in paying the full amount of VAT across to the Exchequer was one, so paying, say, 70% in year one and keeping the other 30%, 80% in year two and 90% in year three. And the reason why it went to year three was because most businesses fail in the first three years, so it was to encourage them to keep going and to increase the life cycle. Japan uses that method on its consumption tax, so there is a track record of doing that. There were other things, like looking at grants for small businesses to keep the cliff edge at bay. So yeah, there was a lot considered. At the time, we were constrained by being in the EU. We don’t have that constraint any more, so it would be worth revisiting on the part of policymakers, because to lower the threshold would bring more businesses in, but it would garner quite a bit of money for the Exchequer.

SR: That is a very good point about the EU, actually. So now we have, we’re a few years after Brexit, I guess we have the freedom, do we, to move the threshold as much as we would like?

ES: Not quite, no, because of Northern Ireland, because Northern Ireland is sort of part in and part out of the EU. We do have some restrictions on what our VAT registration threshold can be in terms of an upper limit, but the EU would be perfectly happy, I think, for us to lower it.

RC: Yeah.

SR: Okay, so I think we’ve started with quite a complicated question, haven’t we, in that case. As I mentioned, we do have a lot of content on this and on this particular issue we do have an article with an introduction from Ed for background to the issue, but then with two external specialists, one giving the case for increasing the threshold, one giving the case for lowering it. So if you are interested in reading more, please do look at that. Now, depending on the circumstances, we could charge VAT at the standard rate of 20%, the reduced rate of 5%, or at the zero rate, or indeed, the supply could be exempt from VAT. Now, Ed, does this cause problems in practice, too?

ES: Yes is the short answer, and the reason is that every time you have a boundary between two of those rates, you have complexity. Businesses and HMRC have to decide whether goods and services that the business is supplying fall in one rate or the other, and we’ve seen that in many areas of VAT this isn’t straightforward, and there’s lots of costly litigation over often bizarre distinctions between two goods. This is most clearly seen in food, and we’ve discussed on this podcast before, poppadoms and whether they’re potato crisps. There’s a whole host of other cases like that – marshmallows, whether they’re giant or small enough to be confectionery or not – and all these really nonsense arguments that lead to significant amounts of VAT revenue either going to HMRC or staying in the pocket of the business. And every time you have one of these arguments, it’s using up time of the business, it’s using up time for the court, it’s using up time for HMRC. So having lots of different rates, even within individual sectors, does cause problems.

SR: We have a section in our tax magazine called Practical Points where we reproduce case notes from the First-tier Tribunal. And I would generally say that half of the ones that we reproduce relate to VAT, which does suggest to me that it’s a particularly contentious area, and we do get lots of disputes. So it does sound like this is the main reason for that in that case, then.

ES: Yeah, I think so. I think if we had one single rate, or at least if we taxed most things at one single rate, we would remove so much uncertainty and complexity in VAT. And I think exemption, in particular, is the worst of those rates, because it adds so many more issues in terms of input VAT recovery.

SR: Are we fairly unique within Europe, then, to have this many exemptions, reduced rates…?

ES: Exemptions, no. Most, I mean, the exemptions were set by the EU initially. Now we’re out of the EU, we could remove them. We are quite unique in having a zero rate. I think Ireland has one and a couple of other countries, but that was only by derogation from EU rules. They gave us special permission to have that zero rate. So that is quite unique, but the UK only taxes around half of consumption, which is low by international standards, and that is because of all of these reduced, zero rates and exemptions.

SR: Okay, so I can say that it would be simpler to not have them, but is it? Is it fair to have them?

RC: No, not in my view. The problem with having reduced rates is the cost isn’t always passed on to the consumer, so those poorest in, you know, in the country, don’t necessarily benefit from it. So if we look at some of the more recent things like the tampon tax and things like that, the price of, you know, sanitary products hasn’t changed, just the amount of VAT that’s paid to the Exchequer has, so it does have a very regressive sort of form. And again, we did look at that in the OTS and concluded that there are more modern ways of reimbursing the poorest in society, things like increasing grants and benefits, which is done in other countries. Singapore, I think, introduced a rate of VAT to its children’s clothing, and gave vouchers to the value of VAT to the least wealthy. And there’s a lot of academic studies that show that a reduction in VAT doesn’t, you know, sort of benefit those that it should do. So I’m with Ed in that, I think, you know, a single rate of VAT would make life a lot simpler. And in fact, in 1972-73 when it was introduced, the idea was to have very, very limited exemptions, financial services and housing being amongst them, and have a straight rate of VAT, which at the time was 10% across all taxable services and goods. It morphed a bit more into what we know now, but even in 1972-73 it was a wider, more widely applied tax than it is now.

SR: Right, well, let’s move on again then, in that case. Now we mentioned that supplies can be exempt, and that this can affect VAT recovery, where a business makes both taxable and exempt supplies. In other words, the business is partially exempt. Now in that case, the business will need to identify how much of its input tax relates wholly to taxable and wholly to exempt supplies, and it will need to apportion any residual input tax. The general rule is, I can reclaim input tax relating to taxable supplies, but not to exempt supplies. However, I understand that insignificant amounts of input tax can be reclaimed in full. And finally, there are a number of ways in which the different calculations can be done. Ruth, even from that broad overview, I think it’s clear that this is a particularly complicated area of VAT. Can you tell us more?

RC: Yes. Again, the OTS looked at this, and I was very privileged, actually, to be looking specifically at this area. And the feedback we had from various parties was that partial exemption was overly complicated for the Exchequer, so even the big banks and insurance companies were spending an inordinate amount of time calculating what VAT they could or couldn’t claim. If you then bring that down to the not-for-profit sector, which is particularly adversely affected by partial exemption, they spend a lot of time but are more resource poor in trying to determine how much VAT they can claim. And at the OTS, we looked at the de minimis threshold, so that’s the insignificant amount of VAT. That hasn’t been raised since 1994, so quite some time, and if it had been indexed, it would be about, in 2017, it would have been about £13,000. But unfortunately, not many businesses know those rules, and for most businesses actually doing the calculation, they are so used to the original calculation that they don’t want to sort of mix things up.

SR: So that’s time consuming for businesses trying to understand and to collect the data and to do the calculations.

RC: Yes.

SR: I imagine it’s also a little bit of uncertainty for them as well in terms of have they got it right, if it’s a challenging calculation.

RC: Yeah.

SR: So that’s a factor. And so far we’ve really just concentrated on the impacts on business, but I imagine this takes its toll on HMRC, too?

RC: It does, because a lot of businesses who have particularly complex activities may well ask for a special method, and that takes time for HMRC to agree, and the taxpayer – in 2017 it was two to three years. I’ve not seen any stats recently whether or not that’s come down, but I’ve also not heard that there’s been a vast improvement, and that’s because of the sort of uncertainty as to whether the method will work in practice, in fitting with the accounting package, and whether or not it’s fair and reasonable from an HMRC perspective. So it does take up a lot of time. Assessments are raised even using the standard method, where people have misunderstood, you know, how to do it, or that they should be doing it. That’s another issue. So yeah, it takes up time on all parties. And if you look at the more progressive VAT regimes like Australia and New Zealand, for instance, they still have exemptions, not as many as we do, but they have a much higher de minimis threshold, and they apply flat rates to certain sectors to make that certainty a bit easier.

SR: Okay, so if nothing else, an easy win would be to try and increase that de minimis threshold back to where it should be, had it been increased in line with inflation?

RC: Yes, definitely.

SR: Okay. Now, I hesitate to mention this, but I think it also impacts on the capital goods scheme, doesn’t it? That’s another huge complication, I imagine.

RC: Yes, the capital goods scheme was another piece of feedback – that you spent endless time doing calculations to actually give not a lot to the Treasury. Some of the banks reported that they had people working on partial exemption in the capital goods scheme for weeks and weeks of a year, which seems a bit stupid. And some people had a team of four or five dedicated to doing this, so resource-wise, very intensive. There are three different categories affected by the capital goods scheme. One is aircraft, one is computer equipment over £50,000 single pieces, and one is the land and property one, which is probably the one that bites the most. That was valued at £250,000 when the capital goods scheme was introduced in, I think 1990 or early this century, and it hasn’t gone up in line with property prices. And it also covers refurbishments and extensions, so people can have more than one capital goods scheme item on the go at once to calculate, so it’s it is very complicated. It is based on the partial exemption method, and the OTS queried whether we still needed the aircraft and the computer one, bearing in mind that people lucky enough to have an aircraft will probably apportion the input tax depending on their business and personal use, and that there isn’t much in the way of computer equipment that costs £50,000 for a single item these days.

SR: No things have changed, a lot, haven’t they?

RC: They have, yes, so we don’t have the big servers and things that we – or Colossus – that we had in 1972 certainly. So, you know it, it is not fit for purpose at the moment.

SR: It’s interesting as well. You mentioned that they haven’t upgraded the threshold for land and buildings, in the same way that they haven’t upgraded the amounts for the de minimis for partial exemption, but they have made a conscious decision in the past to increase the VAT threshold with inflation. So presumably governments of all colours over the last 50 years have thought that, actually, that one needed to keep pace with inflation and needed to be higher.

ES: The other point that I would make on partial exemption is that it’s actually a barrier to digitalisation. It makes it so much harder to implement accounting software actually to use that to generate VAT returns, for example, because you still have to make manual adjustments because of partial exemption.

RC: And actually accounting for it in your accounting software means that you often have to have a granular breakdown of each type of activity and whether it’s exempt, taxable or in the middle or residual. But interestingly, at the time the OTS did its report, Making Tax Digital was just about on the board for VAT, and one of the things that was announced or was put into the melting pot for that, was to provide details of the adjustments as part of the two-way communication with HMRC, which actually hasn’t come to fruition and could probably help in terms of simplifying and giving an overview on people’s calculations for HMRC.

SR: Okay, so as I mentioned earlier, these problems aren’t new, and there have been previous attempts at simplification. Now, Ed, one of the articles written for the campaign explores why previous attempts at simplification have failed, and it pins the blame in part, at least on something called path dependency. Could you explain that for us?

ES: Yeah, so this is an idea that’s been explored quite a bit by Professor Rita de la Feria, and it refers to the idea that decisions made today are heavily influenced by historical choices and structures. So, essentially, the longer that you’ve had something in place, the harder it is to change. And, obviously, VAT we’ve had now for over 50 years in the UK, and a lot of the strangeness that we built into VAT at the start just gets harder and harder to remove, because people are so used to it, and any change is difficult. Whereas I think countries that have introduced VAT more recently could learn from our mistakes and the EU’s mistakes in implementing VAT, and have gone straight to a simpler system. New Zealand is an obvious example of a country that’s learnt from the UK’s mistakes. It introduced its VAT in 1986 and so, as Ruth was saying earlier, they went for the approach of taxing a lot more and having far fewer exemptions. So they kind of skipped that step of having complexity and went to that simpler option. But once you’ve got the complexity, it’s not as simple as saying we know where we want to get to, let’s get there. Those changes are really difficult for various reasons. They take political capital. Every time you change something, you might be introducing complexity that you weren’t intending to introduce.

SR: Yeah, you mentioned political capital, and it’s hard not to think back to the whole Omni Shambles budget and the pasty tax, isn’t it? Which I guess is the same sort of concept. You have an established system, you try to make a change that on the face of it looks like it’s fair, and then there’s a huge backlash, and it’s not worth pursuing.

RC: I think because the public don’t understand what has VAT on and what doesn’t. So if you look at an average supermarket receipt, your standard rated things will be marked differently to your zero-rated ones, usually with an asterisk. Most people don’t go into that degree of detail.

And going back to the pasty tax, I always tell the tale, my husband is a great fan of Greggs’ pasties. And I came home from that particular Budget, sort of, you know, doing all my slides for Budget breakfast the next morning to a very, very angry husband who basically said, “It’s your fault, there’s going to be VAT on pasties.” Which was quite a surprise to me, because I didn’t even know it was coming. And I said to him, “But did you know there was no VAT beforehand?” And he said, “Well, no.” And I said, “Well, what’s the problem then? The price isn’t going to go up immediately. It will creep up, but the companies will absorb the VAT potentially, to start with.” And he was absolutely incandescent with rage. And eventually I had to say to him, “Well, maybe you’ll not eat so many pasties.” But that was probably, on reflection, the worst thing to say, but people don’t understand what they’re paying VAT on.

Does it influence people’s buying choices? Would people buy Jaffa Cakes in preference to a chocolate digestive? No, because they’ll buy Jaffa Cakes because they like them, or chocolate digestives because they like them. They won’t say, “Ooh, oh, I might save a bit by getting Jaffa Cakes.” So the same thing applies mainly in food, but it you know, because people don’t understand VAT, they don’t understand what the zero rate actually means, or the reduced rate. They tend to get very, very angry when something is moved into the standard rate bracket or into a reduced rate bracket without fully understanding what it really means in terms of the benefits they could have for the NHS or for, you know, working credits and things like that that it could generate.

SR: Okay, so we’ve mentioned that you worked for the OTS at the time when the OTS was doing its VAT review. Obviously, there were some successes from that, but as Ed’s pointed out, there are barriers to reform when it comes to simplification methods for VAT. So does that kind of reflect your experiences with the OTS? Was it a frustrating period to come up with ideas or recommendations and then find there wasn’t a huge amount of movement?

RC: Yeah. I mean, I was looking over the report again this morning on the way in, and very few of the recommendations have actually come to anything, and a lot of them were marked as short and medium term, and we’re now seven years on, so we’re probably getting into long term now. It was quite frustrating, because even within the government circles, if you wanted to reduce something or increase the threshold, there would be resistance from some parts, because it meant a dip in Exchequer receipts. If you wanted to reduce administration or increase administration, for whatever reason, there’d be resistance from other departments, because it meant their workload would increase.

As an academic exercise, which essentially it was, overall, it was a very interesting thing to do, but trying to get buy-in from absolutely everyone was really, really difficult, because everybody has a different standpoint. And that was even in the wake of the Mirrlees report, which actually said have one rate of VAT and tax housing and financial services differently. So if you actually read the Mirrlees report, which does come in two very hefty volumes, and I do have them at home, sadly, the message was one rate of VAT – not necessarily 20%, obviously. That would simplify, it would make it more transparent, and people would know exactly what they’re paying VAT on, but getting that buy-in.

And I think at the time the Mirrlees report was issued, I was quoted as saying in some of the tax press, it would be political suicide for the government. And I think that’s probably the biggest arbiter, is that if the government hasn’t got the appetite to simplify it, because it’s worried about public opinion, then we’re not going to get simplification.

SR: So looking ahead, then, to future simplification projects and measures, what lessons can we learn from the past? What can we bring to the future?

RC: That’s a good question. I mean, educating the public as to what VAT means, I think is crucial to this. You have to carry the public with you. If you can give a balanced judgment as to why you’re doing something before you do it, or before you announce it, then you’re more likely to get buy-in. So taxing housing would be an absolute no-no at the moment, but housing is taxed via stamp duty land tax and council tax – that’s domestic property. Commercial property sometimes has VAT on it, stamp duty land tax, business rates. If you actually had a hypothecated tax just for land transactions, which encompassed all of those and actually gave efficiencies, you might get more buy-in from the public than you would do if you just said we’re going to apply VAT to this, or we’re going to up stamp duty land tax, or business rates, or whatever.

So it is an education piece, as Ed mentioned earlier. I think we pay VAT on pretty much 50% of our weekly shop, and the ONS has the statistics to show that. So people are already paying more VAT than they think they are. It’s just that when you start to tax what people consider to be essentials, it gets very, very sensitive. But on the other hand, people want more money to go into the government services that they love and cherish, health being one of them, education being another. And we do have to have that grown-up conversation about simplifying some of the taxes. Even looking at … one of the smoothing mechanisms was to declare VAT on your self assessment or corporation tax return under a certain threshold. So joining forces with the taxes might actually be a simplification in its own right.

SR: They’re all quite significant changes that we’re considering here. So, Ed, in that case, is it best to approach these one at a time slowly, or are we looking at more kind of ‘revolution’ than ‘evolution’ here?

ES: I mean, I think there’s definitely an argument for actually making bigger changes. Incremental change, there’s the risk that you’re going to make things more complicated, as we discussed earlier, and actually you’re using so much effort to not really achieve that much. Whereas if you had wider reform, you would probably use the same amount of effort, same amount of political capital, and you’d get a lot more done than trying to change the VAT treatment of, say, one product. It’s very easy for people to say, “Why are you putting VAT on that?” and, actually, if it’s part of a wider reform, and you might say, “We’re going to tax everything now, but actually we’re going to reduce the VAT rate to 12½%”. You got that give and take. And actually people might buy into that more than, oh, actually, now they’re putting VAT on private healthcare, or now they’re putting VAT on whatever else it is. So I think, yeah, more ambitious is better.

SR: Okay, so I think the broad message that’s coming through is that there, there are issues, shall we say, with the current VAT system, there are better ways to do it, and I think if we are going to tackle that, we need to think big and be brave. That’s it for this episode. Many thanks to Ed and Ruth for your contributions.

ES: Thank you.

RC: Thank you.

SR: And thank you for listening. All of the topics we’ve discussed today are covered in more depth in the articles linked in the show notes. If you found this useful, then don’t forget to subscribe so you never miss an episode. You can rate and share the podcast, too. We’ll be back next month with the next Tax Track. In the meantime, why not check out the sister podcasts from ICAEW. Accountancy Insights provides business, finance and accountancy analysis, while each episode of Behind the Numbers offers a deep dive into a selected topic. There’s also the students podcast aimed at young professionals. If you’re not already a member of ICAEW’s Tax Faculty, remember that institute members can join the faculty for no additional cost. Faculty members receive our monthly Taxline bulletin. In addition, anyone can subscribe to receive our weekly Taxwire bulletin containing the latest tax news from ICAEW. Thank you for listening.