Asked by: Edward Morello (Liberal Democrat - West Dorset)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what the average administrative cost is of collecting VAT from a VAT-registered company.
Answered by Dan Tomlinson - Exchequer Secretary (HM Treasury)
HMRC calculate annually the cost to collect £1 of VAT. In 2024-25, it cost 0.58 pence, i.e. less than one penny, to collect £1 of VAT on average. This ratio has been broadly stable over recent years.
Cost of Collection - VAT - 5 year Trend from 2020-2021 to 2024-2025 | |||||
| 2020-2021 | 2021-2022 | 2022-2023 | 2023-2024 | 2024-2025 |
pence | pence | pence | pence | pence | |
VAT | 0.63 | 0.52 | 0.54 | 0.58 | 0.58 |
Asked by: Edward Morello (Liberal Democrat - West Dorset)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, how many non-VAT registered companies there are in West Dorset constituency.
Answered by Dan Tomlinson - Exchequer Secretary (HM Treasury)
Information on companies that are not VAT registered is not centrally collated and could be provided only at disproportionate cost.
Asked by: Edward Morello (Liberal Democrat - West Dorset)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, how many non-VAT registered companies there are in the UK.
Answered by Dan Tomlinson - Exchequer Secretary (HM Treasury)
Information on companies that are not VAT registered is not centrally collated and could be provided only at disproportionate cost.
Asked by: Edward Morello (Liberal Democrat - West Dorset)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what the estimated total turnover of non-VAT registered companies is.
Answered by Dan Tomlinson - Exchequer Secretary (HM Treasury)
Information on companies that are not VAT registered is not centrally collated and could be provided only at disproportionate cost.
Asked by: Edward Morello (Liberal Democrat - West Dorset)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what estimate she has made of the loss of tax revenue from non-VAT registered companies with turnover above the VAT threshold in the next five years.
Answered by Dan Tomlinson - Exchequer Secretary (HM Treasury)
HM Revenue and Customs (HMRC) estimates the size of the tax gap, which is the difference between the amount of tax that should, in theory, be paid to HMRC, and what is actually paid. The tax gap statistics and details of the estimate methodologies are published annually and are available at: Measuring tax gaps 2025 edition: tax gap estimates for 2023 to 2024 - GOV.UK.
The latest estimate of the tax gap for VAT is 5.0% of theoretical VAT liability, or £8.9 billion in absolute terms, for tax year 2023 to 2024. This figure implicitly captures, alongside other sources of non-compliance, companies failing to register for VAT, however a separate breakdown is not separately published due to the methodological approach used to calculate it and the associated uncertainties.
HMRC does not make projections of the future loss of tax revenue due to companies failing to register for VAT. ‘Measuring tax gaps 2026 edition: tax gaps estimates for 2024 to 2025’ is scheduled for June 2026.
Asked by: Edward Morello (Liberal Democrat - West Dorset)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what the projected annual loss of tax revenue is from non-VAT registered companies with turnover above the VAT threshold.
Answered by Dan Tomlinson - Exchequer Secretary (HM Treasury)
HM Revenue and Customs (HMRC) estimates the size of the tax gap, which is the difference between the amount of tax that should, in theory, be paid to HMRC, and what is actually paid. The tax gap statistics and details of the estimate methodologies are published annually and are available at: Measuring tax gaps 2025 edition: tax gap estimates for 2023 to 2024 - GOV.UK.
The latest estimate of the tax gap for VAT is 5.0% of theoretical VAT liability, or £8.9 billion in absolute terms, for tax year 2023 to 2024. This figure implicitly captures, alongside other sources of non-compliance, companies failing to register for VAT, however a separate breakdown is not separately published due to the methodological approach used to calculate it and the associated uncertainties.
HMRC does not make projections of the future loss of tax revenue due to companies failing to register for VAT. ‘Measuring tax gaps 2026 edition: tax gaps estimates for 2024 to 2025’ is scheduled for June 2026.
Asked by: Edward Morello (Liberal Democrat - West Dorset)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what recent discussions she has had with (a) HMRC and (b) stakeholders on the VAT treatment of voluntary payments made to international carbon offsetting projects.
Answered by Dan Tomlinson - Exchequer Secretary (HM Treasury)
HMRC engaged with stakeholders prior to clarifying the policy on the VAT treatment of voluntary carbon credits in 2024.
As of 1 September 2024, payments made to non-statutory carbon offsetting projects for the purchase of voluntary carbon credits are in the scope of VAT where the place of supply is the UK. Payments made to international carbon offsetting projects are outside the scope of UK VAT.
Asked by: Edward Morello (Liberal Democrat - West Dorset)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what recent assessment her Department has made of the potential impact of (a) business rates and (b) VAT on the financial sustainability of hotels in (i) rural areas and (ii) West Dorset constituency.
Answered by Dan Tomlinson - Exchequer Secretary (HM Treasury)
The Government recognises the significant contribution made by hospitality and tourism businesses, including those in rural areas, to economic growth and social life in the UK.
To deliver our manifesto pledge, from 2026/27, we intend to introduce permanently lower tax rates for retail, hospitality, and leisure (RHL) properties, including hotels, with rateable values below £500,000. This permanent tax cut will ensure that they benefit from much-needed certainty and support.
Ahead of these new multipliers being introduced, the Government recognises that businesses will need support in 2025/26. As such, we prevented the current RHL relief from ending in April 2025, extending it for one year at 40 per cent up to a cash cap of £110,000 per business, and we froze the small business multiplier.
When the new, permanently lower tax rates are set at Budget 2025, the Treasury intends to publish analysis of the effects of the new multiplier arrangements.
VAT is a broad-based tax on consumption, and the 20 per cent standard rate applies to most goods and services. The UK’s VAT rate of 20 per cent is close to the OECD average of 19.3 per cent. The UK has a higher VAT registration threshold than any EU country and the joint highest in the OECD, at £90,000. This keeps the majority of businesses out of the VAT regime altogether.
Asked by: Edward Morello (Liberal Democrat - West Dorset)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what assessment she has made of the potential impact of reducing wine duty to 14 per cent on British wine producers.
Answered by Dan Tomlinson - Exchequer Secretary (HM Treasury)
The wine industry makes a vital contribution to our economy and society. We also know the sector has found economic conditions challenging over the past few years, in part due to the pandemic, energy costs, and the cost-of-living crisis.
As you know, a cut, or even a freeze, to alcohol duty represents a cost to the Exchequer. The baseline assumption is that alcohol duty will be increased annually, so that it does not fall in real terms. As with all taxes, the Government welcomes representations from stakeholders to inform policy development.
Asked by: Edward Morello (Liberal Democrat - West Dorset)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, whether her Department plans to review duty relief schemes to support the growth of British wine production.
Answered by Dan Tomlinson - Exchequer Secretary (HM Treasury)
The wine industry makes a vital contribution to our economy and society.
Draught Relief allows products served on draught to benefit from a lower rate of alcohol duty, providing vital support to producers, pubs and other venues.
Small Producer Relief supports smaller firms and new entrants by providing a reduced duty rate for those who make 4,500 hectolitres or less of alcohol per year.
While wine producers can benefit from these reliefs, both are limited to products below 8.5 per cent alcohol by volume (ABV), in line with the principle underpinning the reformed alcohol duty system that stronger alcoholic drinks should pay more duty.
The Chancellor makes decisions on tax policy at fiscal events, and the Government welcomes representations from the wine sector in advance of the Budget.