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HMRC receives record-high £157bn from VAT bills after VAT holiday ends

The HMRC has revealed it collected a record £157.2 billion from VAT bills in 2021/22, a 55 per cent increase on the £101 billion collected in 2020/21.

HMRC receives record-high £157bn from VAT bills after VAT holiday ends
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The record windfall came after businesses were forced to make up for VAT payments they deferred during the pandemic, according to the national accountancy group UHY Hacker Young.

HMRC’s VAT income has risen sharply after the rate of VAT paid by the hospitality sector increased to 20 per cent on 31 March 2021.

During the pandemic this rate was temporarily reduced to 5 per cent to ease the burden on pubs, restaurants and hotels forced to close during lockdown.

Additionally, the government introduced a VAT holiday between March and June 2020 to support businesses hit hard in the early stages of the pandemic.

This was increased as the pandemic continued to interrupt businesses,  allowing them to defer their VAT payments into smaller instalments until March 2022.

Sean Glancy, partner at the London office, said sharply rising inflation has also played a role in driving up the amount HMRC collects in VAT. 

“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,” he said.

“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.

“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.”

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