Currently businesses only need to register for VAT if their annual turnover is over £85,000, but then need to pay VAT on all turnover. We want VAT to only be payable on turnover over the £85,000 threshold. We also only want businesses to have to pay VAT at the flat rate for their sector.
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Changing this should help support businesses by reducing incentives to stop working to ensure they do not exceed the annual threshold, if they can't afford to carry on trading and then have to pay the VAT on the whole year's turnover. Using the VAT rates for the VAT Flat Rate Scheme (for example 10.5% for hotels) would also reduce the tax burden on businesses.