VAT revenue hits record high of £157bn

VAT revenue hits record high of £157bn

HMRC collected a record £157.2bn from VAT in the last financial year, a 55% hike on the £101bn collected in 2020/21, after businesses paid the VAT they had deferred during the pandemic.
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.
Additionally, between March and June 2020 the Government gave companies the option of taking a VAT ‘holiday’ to help them survive the pandemic. The holiday was later made more generous, allowing many businesses to defer their VAT payments into smaller instalments until March 2022.
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 in VAT.
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.
“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.”