Following the publication of an interim report on its review of the UK’s VAT system the Office of Tax Simplification (OTS) opened a call for evidence to help develop its ideas on how to create a sustainable VAT system for the future that imposes minimal burdens on business.
Following a meeting with the OTS Review team, and consultation with members, CTG has now submitted a detailed response to the consultation.
In the response CTG welcomes the efforts being made to reduce unnecessary bureaucracy and to simplify the VAT system. This is long overdue and reform would have a positive impact in terms of administrative costs for charities. However, we have noted that it is important that this process does not result in inadvertent costs for charities and there is no removal of the invaluable zero rates charities benefit from.
CTG has identified this Review as an important opportunity to address long-standing structural obstacles facing charities in the VAT system, be that through the introduction of a special refund scheme for charities in relation to their non-business activities, or by extending the existing reduced and zero rates on supplies to charities to cover all supplies to charities in addition to the reduced rate for supplies by charities.
The CTG response also comments on the specific technical and practical questions raised in the review, on topics including partial exemption, VAT registration threshold, guidance and penalties. the response also provides detailed feedback on the scope of existing reduced and zero rates and recommendations for improvements, particularly in relation to scope of the RCP definition and other charity specific reliefs.