Official Statistics

Annual UK VAT Statistics 2019 to 2020 Background and References

Updated 15 December 2020

1. About this release

This official statistics publication provides information on VAT receipts, Home VAT and Import VAT. It includes Home VAT declared on traders’ returns classified by sector and trade group, VAT registrations, de-registrations and trader population. It also contains a historic series of annual and quarterly VAT receipts and VAT registrations and de-registrations.

2. Coronavirus (COVID-19)

To help businesses manage cash flow during the coronavirus pandemic, VAT traders have been able to defer Home VAT payments due between 20 March 2020 and 30 June 2020. Businesses either repay the full amount by 31 March 2021 or make smaller payments up to the end of March 2022.

3. VAT Annual Statistics Guidance

There are 3 main measures of tax revenue:

1. on an accruals basis (when the tax liability arose)

2. on a declared liability basis (when HMRC is notified of the liability)

3. on a cash receipts basis (when the tax was paid to HMRC)

Types of VAT reported and data sources

Total VAT

Total VAT is reported on a cash receipts basis. The data source for Total VAT is HMRC bank account data, with accounting adjustments to remove revenue from penalties and funds paid to the wrong bank account.

Total VAT receipts are calculated by adding Home VAT net receipts and Import VAT receipts. Prior to April 2015, Total VAT receipts were calculated by subtracting other taxes from the Indirect Taxes Consolidated Fund total.

Home VAT net receipts

Home VAT net receipts are reported on a cash receipts basis. Home VAT net receipts are calculated by subtracting Home VAT repayments from Home VAT payments. Prior to April 2015, Home VAT net receipts were calculated by subtracting Import VAT receipts from Total VAT receipts.

Home VAT payments and repayments

Home VAT payments are reported on a cash receipts basis. The data source for Home VAT payments is HMRC bank account data.

Home VAT repayments are reported on a cash receipts basis. The data source for Home VAT repayments is HMRC bank account data. Prior to April 2015, Home VAT repayments were calculated by subtracting Home VAT payments from Home VAT receipts.

This method attributed any unallocated residual from the Indirect Taxes Consolidated Fund to Home VAT repayments; this residual averaged around +/-£100m per month.

Most traders that regularly receive VAT repayments submit monthly returns. By value around 70% of VAT repayments are made to traders submitting monthly returns. Most of the remaining 30% of VAT repayments are made to traders submitting quarterly returns. The VAT repayments series includes VAT refunds.

Import VAT receipts

Import VAT receipts are reported on a cash receipts basis. The data source for Import VAT is Customs & Excise Core Accounting System (CECAS).

Import VAT is the transaction tax levied on imported goods from outside the fiscal (VAT) territory of the European Community (EC). Goods are treated as imported when they arrive in the UK directly and are entered for free circulation in the UK; or when goods are removed from a Customs suspensive arrangements for free circulation in the UK. For more details see HMRC VAT Public Notice 702 - Imports

By value around 95% of Import VAT is paid under the Duty Deferment Scheme. The Duty Deferment Scheme allows importers to pay by direct debit for the Import VAT liability arising in each calendar month on the 15th day of the next calendar month.

The remaining 5% is paid with no deferment when the goods are imported. This means that most Import VAT receipts relate to liabilities arising in the previous month. For more details see HMRC Public Notice 101 - Deferring Duty, VAT and other charges

Services supplied from outside the UK are not taxed under Import VAT but may be taxed under a Home VAT reverse charge. For more details see HMRC Public Notice 741A - Place of supply of services.

VAT returns

VAT returns can be reported on a monthly, quarterly or annual cycle. Most traders submit returns quarterly. By value around 95% of VAT Payments are made by traders submitting quarterly returns. Most of the remaining 5% of VAT Payments are received from traders submitting monthly returns.

Paper returns and cheque payments are due by the last working day of the month after the accounting period (for example, if the accounting period is January to March the return and payment is due by 30 April or if that is not a working day then the previous working day).

Online returns

Online returns and electronic payments (excluding Payment on Account) have a 7 calendar day extension, and an additional 3 working days for direct debit payments (for example, if the accounting period is January to March the return and payment is due by 7 May, and direct debits will be taken 3 working days after 7 May). For more information see VAT Returns - Deadlines.

The electronic payment extension does not apply to Payment on Account (POA) traders. By value nearly half of Home VAT payments are made by Payment on Account traders. For more details see HMRC Public Notice 700/60 - Payments on account.

Every VAT registered business with an annual VAT liability of more than £2.3 million and accounting for VAT using quarterly returns is required to make payments on account. Once in the POA scheme, each business must make interim payments at the end of the second and third months of each VAT quarter.

These interim payments are payments on account of the quarterly VAT liability. A balancing payment for the quarter, that is the quarterly liability less the payments on account made, is then made with the VAT return. For more details see HMRC Public Notice 700/60 - Payments on account.

VAT returns

VAT Returns data is taken from HMRC administrative systems on which businesses’ VAT returns are recorded. Receipts data is not directly comparable with returns figures as it is not possible to match payments or repayments of VAT to a particular VAT return that has been submitted.

The net tax declared on VAT returns will not be the same as the payments and repayments made by a business. It will not include payments or repayments that are unrelated to the returns or where payments/repayments do not match the amount declared on the return (for example where repayment is withheld by HMRC).

The net tax also relates to Home VAT only, as Import VAT is recorded on different systems from which we are unable to gather this data. For these reasons the net tax shown as coming from VAT returns data will not match up with Total VAT receipts published elsewhere.

All of the revenue figures published in these statistics and the VAT Bulletin are on a cash receipts basis (for example, April’s figure refers to cash received in April). VAT statistics on a declared liability basis are reported in these statistics for Home VAT. Calculated statistics on accruals are published in ONS/HMT Public Sector Finance publications.

The cash receipts published in these statistics and the VAT Bulletin relates to cash receipts paid into the Consolidated Fund. Bulletin figures differ from the audited accounts as published in the “HMRC Annual Report and Resource Accounts”.

The Annual Report figures relate to accrued revenue and differ from these statistics/Bulletin figures as a result of adjustments made to reflect all liabilities due and incurred up to 31 March of each year (and therefore do not only reflect movement of actual cash).

Data source is the VAT annual extract, which is a summary of VAT returns made throughout each financial year; all figures given refer to the live VAT population at financial year end or any trader who was not live at the year end, but submitted a non-nil return throughout the year.

Coverage

These statistics cover the United Kingdom. It is not possible to provide any regional breakdown on where tax liability arose for VAT as HMRC does not collect this data on the tax return. However, statistics showing an estimate of receipts at a country level have been published.

The Office for National Statistics (ONS) has also published experimental statistics at country and regional levels as part of the ‘Country and regional public sector finances’, although this is on an accruals basis so will not align exactly with the Annual VAT Statistics.

The figures provided on VAT returns relate to the net tax declared by businesses on VAT returns that have been processed by HMRC. The source data on which it is based can be subject to revisions as a result of assessments or litigation and so these figures should be treated as provisional.

In addition this data is grouped by return date (the final month of the return period), whereas the other data sources will be based on date of receipt, and these will not be the same due to the rules governing when traders are required to submit their return.

VAT return boxes

Each VAT return box is recorded with its own abbreviated title in HMRC data. The VAT returns box numbers represent the following:

Box 1: VAT due on sales and other outputs

Box 2: VAT due from trader (but not paid) on acquisitions from other EU countries

Box 3: Total VAT due

Box 4: VAT reclaimable on your purchases

Box 5: VAT payable or reclaimable

Box 6: Total sales excluding VAT

Box 7: The total purchases excluding VAT

Box 8: Total value of goods trader supplied to other EU countries

Box 9: Total value of goods trader acquired from other EU countries

Home VAT input tax and output tax

VAT returns are summed over the financial year to calculate total annual input tax and output tax amounts. Total input tax corresponds to Box 4 in a VAT return form, tax deductible (such as reclaimable as input tax) on goods/services purchased during the period (including on acquisitions from the EC and Import VAT).

Total output tax corresponds to Box 1 in a VAT return form, tax payable on goods/services sold during the fiscal year.

VAT trader data

The summary statistics in this publication, excluding those relating to VAT cash receipts, are based on a summary dataset – known as the VAT annual extract – used for analysis by KAI in HMRC.

This consistent dataset is created annually as a baseline for analysis; it is a summary of VAT returns level information and trader level information for the financial year. The data are compiled into a single table holding one record/trader for all traders.

For each VAT registered entity there is relevant VAT information covering the unique VAT registration number, the relevant trade sector for that entity, any VAT schemes the entity uses, trader status etc.

The trade groups that have been used are those described in the 2007 standard industrial classification of economic activities, details of which can be found on the Office for National Statistics website.

The trade groups are taken from businesses’ entries on HMRC systems. They will relate to the main economic activity of that business, even though each business could perform a range of activities. This classification should therefore not be taken as a precise indication of the economic activity in each group.

VAT population

The data source for new registrations and deregistrations is administrative data from the VAT mainframe, a central database held by HMRC which contains live information on the VAT population.

The live trader population is calculated as the previous month’s live trader population plus this month’s new registrations minus this month’s deregistrations.

Population figures from the VAT annual extract dataset in this factsheet refer to the live trader population during the year; those VAT registered traders active at 31 March of the fiscal year or who had submitted a non-nil return through the year.

Traders are recorded as not live if they are recorded as a missing trader before the end of the fiscal year. If this information is not available it is because the trader has deregistered before the end of the fiscal year. This is in contrast to previous versions of these statistics where only those live at the end of the financial year were included in the analysis.

Registered traders

Businesses need to register for VAT when their turnover of VAT taxable goods and services is over the VAT registration threshold; businesses below the VAT registration threshold may also choose to voluntarily register.

The Department for Business, Energy and Industrial Strategy publishes Business Population Estimates, which provides information on the total number of private sector businesses. Further information is provided on the employment and turnover in these businesses.

The data source for new registrations and de-registrations is administrative data from the VAT mainframe. VAT mainframe is a central database held by HMRC which contains live information on the VAT population. The live trader population is calculated as the previous month’s live trader population plus any new registrations and minus any new de-registrations.

The ONS publishes Business Demography, UK Statistical bulletins, which contains data on births, deaths and survival rates of businesses on the ONS website.

Although this uses VAT registration data it will not match HMRC figures on registrations for a number of reasons. The ONS data includes PAYE-registered enterprises and excludes some businesses that would be recorded separately in HMRC data.

Further adjustments are also made to the ONS series to better reflect business start-ups and closures and so indicates the number of businesses that are actually trading at any one time. The HMRC series is a reflection of occurrences of the VAT registration and deregistration process.

VAT turnover

Turnover here refers to the annual turnover declared on traders’ returns, excluding VAT (absolute turnover figures are used, hence for traders only registered for part of the year their returns are not scaled and values will only cover part of the year). This is taken to correspond to the financial year equivalent of Box 6 of the VAT Return (includes supplies to other EC member states).

Businesses below the VAT registration threshold limit are those that have voluntarily registered or registered traders whose turnover has not gone below the VAT deregistration threshold. Businesses may be able to voluntarily register for VAT with the same responsibilities as those who must register.

Registering may be beneficial, allowing a business to charge VAT on sales and claim back VAT on purchases. This would be advantageous for businesses if for example they sell to other VAT registered businesses, and also if they sell zero-rated goods or no goods and buy standard-rated goods they are normally able to claim back a VAT refund from HMRC.

4. VAT Annual Statistics methodology

Statistical quality

HMRC’s statement on statistical quality is published in HMRC: Official Statistics.

These statistics are based on administrative data sources. These statistics undergo a thorough internal quality-assurance procedure before publication. The ‘VAT annual and quarterly receipts’ statistics are aligned with HMRC’s Trust Statement, which is audited by the National Audit Office.

In order to ensure that we are fully complying with the National Statistics Code of Practice and our obligations under Section 18 of the Commissioners for Revenue and Customs Act 2005 (CRCA, which makes it clear HMRC must not disclose taxpayer information to anyone, unless there is lawful authority to do so), we have reviewed the outputs in this table.

As a result, we have suppressed some values. Where this suppression has occurred, we have indicated this with a ‘SUPP’.

Rounding policy

Cash receipts are rounded to the nearest million pounds. Financial figures sourced from the VAT Annual Extract are rounded to the nearest £10m. The number of traders has been rounded to the nearest 10.

Other quantities such as trader population are not rounded. Any inconsistency between the totals and their constituent parts, or any inconsistency between the text and the tables, is due to the totals and commentary being calculated using unrounded data.

Please see below definitions of symbols used in the data tables:

N/A indicates that no information or data not available

0 equals to >0 but does not round to 1

Revisions policy

Any receipts data that has been revised will be marked with an ‘r’ and an explanation provided as appropriate.

5. VAT Annual Statistics guidance

VAT total theoretical tax liability (VTTL), VAT receipts and VAT gap

The VAT gap is measured by comparing the net VTTL with actual receipts.

The difference between these amounts is known as the VAT gap. The VAT gap methodology uses a ‘top-down’ approach which involves these steps:

1. Gathering data detailing the total amount of expenditure in the economy that is subject to VAT, primarily from the ONS.

2. Applying the rate of VAT on the ONS expenditure base on commodity breakdowns to derive the gross VTTL.

3. Subtracting any legitimate refunds occurring through schemes and reliefs to arrive at the net VTTL.

4. Subtracting actual receipts from the net VTTL leaving the residual element - the VAT gap.

A detailed description of the methodology and latest estimate at the time of publication can be found in ‘Measuring tax gaps 2020 edition’.

Structural reliefs

The estimated costs of tax expenditures and structural reliefs, and the illustrative effects of tax changes, can be found on the GOV.UK website.

Revenue effects of Budget measures

The estimated effects of Budget policy decisions for the latest year can be found on the GOV.UK website.

Historic changes to VAT rates and coverage

Changes to the standard and reduced rates of VAT and the goods/services covered are detailed in the VAT Bulletin.

For more information on VAT go to VAT: detailed information.

6. Contacts

For general enquiries about VAT please go to VAT: detailed information or contact the VAT Helpline on 0300 200 3700.

7. Publication calendar

We aim to publish the Annual VAT Statistics annually. This release, covering data up from 2019 to 2020, was published on 15 December at 9:30am. The next release, covering 2020 to 21 will be published in Autumn 2021.

Releases back to 2005 can be found on the UK Trade Info website.

8. User engagement

We are committed to improving the official statistics we publish. We want to encourage and promote user engagement, so we can improve our statistical outputs.

We would welcome any feedback and suggestions you may have relating to the Annual VAT Statistics. E-mail : revenuemonitoring@hmrc.gov.uk

9. National Statistics

The United Kingdom Statistics Authority (UKSA) has given these statistics National Statistics status. This means that the statistics comply with the Code of Practice for Statistics as set out within the Statistics and Registration Service Act 2007.

National Statistics status can generally be interpreted to mean that statistics:

• meet user needs
• are effectively communicated and accessible
• undergo regular quality assurance reviews
• produced professional and according to sound methods
• managed impartially in the public interest and free of political interference

Contact UKSA for queries about National and Official Statistics.

10. Related statistics

National statistics for cash receipts for all HMRC administered taxes are published in HM Revenue and Customs receipts.

The VAT Bulletin published on the UK Trade Info website contains information on monthly VAT receipts and registrations/de-registrations.

HMRC publishes a Tax Gap for VAT. Official statistics on Tax Gaps are published in Measuring Tax Gaps.

The estimated costs of tax expenditures and structural reliefs, and the illustrative effects of tax changes are published in Tax expenditures and ready reckoners.

The ONS and HM Treasury publish Public Sector Finances, which covers tax receipts from all taxes on the ONS website.

VAT receipts are forecast by the independent Office for Budget Responsibility (OBR) and published on the OBR website.