Fuels: VAT
(asked on 24th February 2022) - View Source
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, if will make an estimate of the potential level of revenues to the Exchequer in (a) 2017-18, (b) 2018-19, (c) 2019-20, (d) 2020-21 and (c) 2021-22 based on a rate of (i) 5 percent, (ii) 4 percent, (iii) 3 percent, (iv) 2 percent, (v) 1 percent and (vi) 0 percent for VAT on fuel.
HMRC publishes estimates of the cost to the Exchequer of the current 5 percent reduced rate of VAT on supplies of domestic fuel and power:
https://www.gov.uk/government/statistics/main-tax-expenditures-and-structural-reliefs
The estimates shown in the published table represent the cost of the 5 per cent reduced rate compared to the 20 per cent standard rate, a relief of 15 per cent. Estimates of the additional revenue cost of rates below 5 per cent can be derived by taking the respective proportions of the current cost, as shown in the table below:
Reduced rate of VAT on supplies of domestic fuel and power | |||||
| 2017-18 | 2018-19 | 2019-20 | 2020-21 | 2021-22 |
£ million | Forecast | ||||
Cost of current 5 per cent reduced rate | 4,700 | 4,700 | 5,000 | 4,500 | 5,200 |
Additional revenue cost of 4 per cent rate | 300 | 300 | 300 | 300 | 300 |
Additional revenue cost of 3 per cent rate | 600 | 600 | 700 | 600 | 700 |
Additional revenue cost of 2 per cent rate | 900 | 900 | 1,000 | 900 | 1,000 |
Additional revenue cost of 1 per cent rate | 1,300 | 1,300 | 1,300 | 1,200 | 1,400 |
Additional revenue cost of 0 per cent rate | 1,600 | 1,600 | 1,700 | 1,500 | 1,700 |
These estimates are based on economic statistics on household expenditure on domestic fuel and power, as published by the Office for National Statistics. HMRC is unable to produce estimates based on VAT return data because businesses are not required to provide figures at a product level on their VAT returns, as this would impose an excessive administrative burden.