VAT a taxing issue for many Scottish firms

Scottish businesses struggling to manage VAT is costing the economy millions of pounds of lost revenue, a leading tax expert has claimed.

Veronica Donnelly, head of VAT with accountants Campbell Dallas, which has an office in Perth, is urging Scotland’s owner-managed businesses to place VAT at the top of the financial agenda.

She said firms should do a thorough review of how they manage the “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,” she said.

“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.”

VAT was introduced 45 years ago, replacing the Purchase Tax which had been the principal tax on luxury goods since 1940.

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

HMRC estimates that Scotland’s contribution to VAT receipts was nearly £10 billion for 2016-17.

Ms Donnelly added: “Businesses reviewing their VAT could save a great deal of money and be the most costeffective investment they have made in the business for many years.”

Across the UK, VAT will raise more than £120bn in 2016-17, or 16.9% of all receipts, equivalent to £4,500 per household.

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

Veronica Donnelly.