Scottish businesses losing millions through VAT, warns Campbell Dallas

Experts at Scottish accountancy firm Campbell Dallas are marking the 45th anniversary of the introduction of VAT in the UK with a stark warning that Scotland’s owner-managed businesses are struggling to manage VAT, a problem that is costing Scotland’s economy millions of pounds of lost revenue.

VAT was launched in the UK on 1st April 1973, three months after the UK joined the European Union on 1st January and replaced the Purchase Tax which had been the principal tax on luxury goods since 1940.

Today, HMRC estimates that Scotland’s contribution to VAT receipts is nearly £10 billion for 2016-17, or 8.3 per cent of all UK VAT receipts.

The Office for National Statistics estimates that across the UK, VAT will raise over £120 billion in 2016-17, or 16.9 per cent of all receipts, equivalent to £4500 per household.

The estimate for 2017-18 is nearly £126 billion.

VAT is the third largest source of government revenue after income tax and national insurance.

Veronica Donnelly, head of VAT with Campbell Dallas, is urging Scotland’s owner managed businesses to place VAT at the top of the financial agenda, and do a thorough review of how they currently manage VAT.

She said: “Very few businesses have the systems and expertise to manage an increasingly complex and onerous tax. The VAT system now has so many variations for products, sectors and situations it is no wonder business owners are finding it difficult to manage. Poor VAT management can seriously limit investment, curtail expansion and restrict the ability of businesses to create employment opportunities, particularly for young people. In the worst case, failing to manage VAT efficiently can cause serious cash flow problems that threaten the viability of the business.

She added: “We are encouraging Scotland’s owner managed businesses to use the 45th anniversary of VAT on April 1st as the starting point to review their VAT. It could save their companies a great deal of money and be the most cost-effective investment they have made in the business for many years.”