Could VAT Become Standardised Across Europe?

18 November 2013, 18:05

The difference between what the EU wants and what actually happens can be large in some cases. But it will nonetheless be interesting to see whether they put through their latest plans to standardise the process for VAT returns across all the countries that are part of the EU.

At first glance this looks to be a good idea. However as with all new ideas, the proof of the pudding will be in how it comes out in the end. The basic idea – if it goes ahead – would bring the UK in line with many other European countries. At present businesses in the UK that are registered for VAT will put in their VAT returns every three months. If the new system was to come into use, this would change for many businesses. It would increase to a monthly filing system instead.

It looks as though if this were to happen, it would only apply to businesses turning over around £1.7 million or more per year. So many smaller businesses would stay as they are currently and deliver their VAT return every three months, as they do now. Larger businesses would swap to the monthly reporting requirements.

However this looks to be balanced out by the fact the paperwork would become simpler. Making the whole system simpler would certainly be an improvement, but it remains to be seen whether this actually happens. Even if the system did get easier, it would still require twelve returns a year – three times as many as businesses are currently submitting. This could arguably outweigh the benefits of being able to streamline the service in some way.

Smaller businesses might be the only ones to benefit if it does all go ahead. With the same number of reports to make per year, but fewer boxes to fill in, this could save time for them. It remains to be seen whether the system does come in, since the European Commission has only just come up with a revised method of reporting. It has taken a year to get to this stage, and any proposed changes should come in around 2017 if it all goes ahead.

Needless to say we shall be watching to see what happens next, and whether the system does eventually prove to make life easier (or harder) for big businesses in the UK. Certainly it will be quite a change to swap from three monthly reporting to monthly reporting – and it could have a big knock on effect as far as costs are concerned. Could this be a case of saving money and time in one area, only to spend it in another?

We’ll be watching to see when the next announcement is made.