Autumn Statement 2022 

VAT and Customs Duty

Robert Marchant, Partner, VAT

Todays Autumn Statement did not include any significant VAT developments with the announcements being only in relation to the freezing of the VAT registration threshold and a decision not to apply VAT to private school fees.

From an international trade perspective, the announcement that will be welcomed by importers is that customs duty tariffs will be removed on a diverse range of goods following a consultation process that concluded last year.

To discuss what this means for you and your business get in touch or speak to your usual Crowe contact.

Our tax team looks at the measures announced in the 2022 Autumn Statement.

Freezing of the VAT registration threshold

These decisions are not unexpected. The Conservative Party 2019 Manifesto set out that there would be no change to the standard UK VAT rate. This decision also makes sense in context of the current inflationary pressures as a rate rise would have the effect of pushing up prices and most likely worsening inflation.

There had been speculation that VAT could be reduced on domestic fuel costs. However, such a move would also risk the same criticisms as with the current energy price cap, which is applied to all energy users and so not targeted at those that need it. It was therefore expected that this change would not be made.

What has been announced?
  • The compulsory VAT registration threshold of £85,000 will be frozen until 2026.
  • VAT will not be charged on private school fees.

The freezing of the VAT registration threshold is consistent with other tax measures and the freezing ultimately results in an increase in the number of organisations that will have to register for and account for UK VAT. The UK’s VAT registration threshold remains a ‘cliff-edge’ and a possible barrier to growth, as exceeding the threshold by just a small amount results in a 20% increase in pricing.

Private school fees are currently VAT free and the exemption is going to continue to apply. While the addition of VAT may result in an increase in the VAT collected by the government, the Chancellor highlighted that the additional tax collected would be outweighed by the costs resulting from private school fees no longer being affordable for many families, resulting in pupils moving into comprehensive schools.

Back to top: Explore all Autumn Statement measures announced 

Chancellor removes import duties on over 100 products

From a Customs Duty perspective, a measure was announced to remove import duties on over 100 products. This measure will remove tariffs as high as 18% on goods ranging from aluminium frames used by UK bicycle manufacturers, to ingredients used by UK food producers and components used in automotive manufacturing.

After leaving the EU, the UK government invited applications from businesses for duty suspensions, which act to temporarily remove tariffs for certain specified goods, if certain criteria can be met. Qualifying products must not be produced in the UK, or at least only in limited quantities or where production is temporarily insufficient. The products need to be used in a production process or there needs to be a demonstration of a specific temporary need for the product.

Applications closed in July 2021 and the government published the full list of 238 requests, including products as diverse as rum, cranberries, cigars, and chemical products. Full details should be announced shortly on exactly which applications have been approved. It had been expected that successful applications should have achieved the tariff suspension from 1 January 2022, with a regular six-monthly round of applications to replace the EU system of tariff suspensions.

Back to top: Explore all Autumn Statement measures announced

Contact us

Robert Marchant
Robert Marchant
Partner, National Head of Tax