It has been confirmed, by the Chancellor, that the taxable turnover threshold that determines whether businesses should be registered for VAT will be frozen at £85,000 until 31 March 2024. The taxable turnover threshold that determines whether businesses can apply for deregistration will also be frozen at the current rate of £83,000 for the same time period.
Businesses are required to register for VAT if they meet either of the following two conditions:
- At the end of any month, the value of the taxable supplies made in the past 12 months or less has exceeded £85,000; or
- At any time, there are reasonable grounds for believing that the value of taxable supplies to be made in the next 30 days alone will exceed £85,000.
It was also confirmed that the temporary VAT reduction to 5% for the tourism and hospitality sector that was first announced as part of the Summer Economic update last year and had been subsequently extended until 31 March 2021, will be extended for a further 6 months until 30 September 2021. A new reduced rate of 12.5% will then be introduced for the sector until 31 March 2022. It is hoped this VAT cut will help rehabilitate the tourism and hospitality sector that has been severely impacted by the coronavirus pandemic.