ICAEW.com works better with JavaScript enabled.

TAX NEWS

Scrap exemptions to simplify VAT rules, urges ICAEW

Article

Published: 27 Jul 2021 Update History

ICAEW has reiterated its call for all VAT exemptions to be abolished in its response to HMRC’s consultation on how to simplify VAT rules related to land and property. It has also recommended the removal of all VAT options.

VAT rules related to land and property are unnecessarily complex and could not only benefit from significant simplification, but also highlight the need for a more fundamental review of VAT exemptions, according to ICAEW’s Tax Faculty.

In its response to HMRC’s call for evidence on simplifying the VAT land exemption, published as ICAEW Rep 70/21, ICAEW concludes that following the UK’s departure from the EU the government is in the best position since the introduction of VAT to thoroughly review the structure of the tax.

It argues that abolishing exemptions would remove the difficulties for businesses and HMRC posed by partial exemption. However, ICAEW accepts that the question of identifying business and non-business activities would remain and further consideration would need to be given as to how that VAT incurred might be recovered.

ICAEW suggests that all land and property transactions should subject to VAT at the standard rate or reduced rate, other than those relating to domestic property which should remain zero rated. This approach would remove many of the complexities of the current regime, it concludes.

The faculty also recommends the removal of all VAT options, arguing: “Any option, whether it be to tax or exempt a transaction, creates complexity and uncertainty, as there are then two possibilities for the VAT liability of what is essentially the same type of supply.”

ICAEW’s Tax Faculty has previously called for the abolishment of VAT exemptions in letters to the Financial Secretary to the Treasury, most recently ahead of the 2021 Budget, as well as in response to the Treasury Select Committee's call for evidence on tax after coronavirus.

More support on tax

ICAEW's Tax Faculty provides technical guidance and practical support on tax practice and policy. You can sign up to the Tax Faculty's free enewsletter (TAXwire) which provides weekly updates on developments in tax.

Sign up for TAXwireJoin the Tax Faculty
Tax Faculty

This guidance is created by the Tax Faculty, recognised internationally as a leading authority and source of expertise on taxation. The Faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.

Open AddCPD icon

Add Verified CPD Activity

Introducing AddCPD, a new way to record your CPD activities!

Log in to start using the AddCPD tool. Available only to ICAEW members.

Add this page to your CPD activity

Step 1 of 3
Download recorded
Download not recorded

Please download the related document if you wish to add this activity to your record

What time are you claiming for this activity?
Mandatory fields

Add this page to your CPD activity

Step 2 of 3
Mandatory field

Add activity to my record

Step 3 of 3
Mandatory field

Activity added

An error has occurred
Please try again

If the problem persists please contact our helpline on +44 (0)1908 248 250