HomeVATVAT revenues hit record levels as businesses pay off debt

VAT revenues hit record levels as businesses pay off debt

HMRC has revealed it collected a record £157.2bn from VAT in the last financial year, after businesses paid the bills they had deferred during the pandemic. The latest figure is a 55% hike on the £101bn collected in 2020/21.

Additionally, the rate of VAT paid by the hospitality sector rose to 20% on 31 March 2021 after the rate was temporarily cut to 5% during the pandemic to ease the burden forced to close during lockdown.

Between March and June 2020 the Government gave companies the option of taking up the offer of a VAT holiday to help them survive the pandemic.

The holiday was later made more generous, allowing many businesses to defer their payments into smaller instalments until March 2022.

Inflation plays its part in highest ever receipts

Sean Glancy, a partner at accountancy group UHY Hacker, said that sharply rising inflation has also played a role in driving up the amount HMRC collects.

He said: “For all the good the VAT holiday did at the time it was introduced, it’s resulted in businesses paying the most VAT in recorded history the year after.

Government urged to slash VAT amid soaring prices

“The VAT holiday saved a lot of businesses in 2020 but it effectively just pushed the bills from one year into the next. Those increased payments in 2021 hurt for some of them.”

He added: “If inflation continues to run out of control the amount paid in VAT is only going to rise.

“Cutting VAT temporarily is one option the Government has to ease the cost of living crisis for individuals and businesses.”

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