Limited Liability Companies

Oral Answers to Questions — National Finance – in the House of Commons at 12:00 am on 27th June 1985.

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Mr. John Mark Taylor:

asked the Chancellor of the Exchequer what proportion of limited liability companies operate below the value added tax threshold; and if he will estimate how much revenue would be lost if it was raised (a) to £20,000 and (b) to £25,000.

Photo of Mr Peter Rees Mr Peter Rees , Dover

The proportion of VAT registered traders with turnover below the threshold is about 20 per cent. of the total VAT registered trader population. To increase the threshold to £20,000 would have a negligible revenue cost, and to £25,000, about £30 million.

Mr. Taylor:

In thanking my right hon. and learned Friend for that helpful reply, may I ask him to comment on the small business lobby, which has said that it would be good for business energy and good for employment to raise the threshold to £50,000?

Photo of Mr Peter Rees Mr Peter Rees , Dover

I have noted those comments, but equally my hon. Friend and the House will have noticed that there have been representations from other quarters suggesting that to increase substantially the threshold would result in a distortion of competition. Indeed, during consideration of the Finance Bill my hon. Friend the Member for Enfield, North (Mr. Eggar) suggested in an amendment which was not selected, that the threshold should be reduced for the construction industry.

Photo of Tim Yeo Tim Yeo , South Suffolk

Is my right hon. and learned Friend aware, however, that many small businesses in Suffolk and throughout the country would regard a substantial increase in the threshold at which they became liable to register for VAT as the single most useful step that the Government could take to try to assist their development, and that they regard such a move as long overdue?

Photo of Mr Peter Rees Mr Peter Rees , Dover

I note the comments of my hon. Friend regarding East Anglia, but he and the House may be aware that there are already 300,000 traders who are trading at below the threshold but who have not chosen to de-register. This may indicate some evidence the other way, in that it does not quite reflect the hardship that my hon. Friend's question indicates.