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VAT Registration Threshold

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16 March 2018

Since the 2016 announcement of the Office of Tax Simplification (OTS) review of Value Added Tax (VAT), much has been made of the UK’s registration threshold, and the perception that, in comparison to other EU Member States, it is very high.  Currently, and until at least 2020, the point at which businesses are obligated to register for VAT in the UK is £85,000.

Other major European economies have much lower thresholds; France imposes VAT at €82,800 (around £73,150) for goods, but just €33,200 (approx. £29,350) for services, Italy requires registration at €60,000 (approx. £53,000), whilst Germany comes in at €17,500 (around £15,500) and the Netherlands is as low as €1,345 (just under £1,200)!  Amongst those values, the UK does look exceptionally generous.

The OTS review highlighted that such a limit disincentivises a number of businesses from breaching the threshold, either to remain a tax free trader and so keep pricing low to avoid the administrative burden of VAT.  Certainly, for smaller businesses it is possible to derive a healthy return from the business without breaching the threshold.  Figures from reports at the time of Budget 2017 suggest that by lowering the threshold to just £25,000 (a threshold last seen in 1990) the change would bring enough extra businesses into the regime to generate another £1.5-2bn for HM Treasury annually.

This week’s announcement of a consultation seeks to ‘continue the conversation’ about VAT and the point of registration.  HMRC are looking for information from the population about what effect the threshold has on business behaviour, why those effects manifest themselves, and what could be done in light of this.

All exchanges based on rates at the time of writing in March 2018.


Julian Millinchamp - Indirect Tax Director
Julian Millinchamp
Indirect Tax Director Contact details