Official Statistics

Annual UK VAT statistics: 2019 to 2020 commentary

Updated 18 June 2021

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This publication is available at https://www.gov.uk/government/statistics/value-added-tax-vat-annual-statistics/annual-uk-vat-statistics-2019-to-2020-commentary

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.

The Annual UK VAT Statistics is produced by V Man and A Morton of the Indirect Tax Customs and Coordination team. For statistical questions, email revenuemonitoring@hmrc.gov.uk.

Coronavirus (COVID-19) VAT deferrals

To help businesses manage cash flow during the COVID-19 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 repay in smaller payments up to the end of March 2022.

Headlines

  • Total VAT receipts in the tax year ending March 2020 decreased by 2% from the previous financial year. There was a downward impact on receipts from the VAT deferral measure which took effect from 20 March 2020.

  • The Wholesale and Retail sector continued to be the largest contributor to net Home VAT liabilities.

  • 62% of total net Home VAT declared was paid by traders with an annual turnover greater than £10 million.

Chart 1: Annual VAT receipts increased steadily between 2010 to 2019 until the tax year ending March 2020 when Home VAT decreased by £2.3 billion and import VAT decreased by £367 million, with a downward impact on Home VAT from the VAT deferral measure.

VAT population and taxable turnover

Background

VAT is charged when a VAT-registered business sells to either another business or to a non-business customer. When VAT-registered businesses buy goods or services they can generally reclaim the VAT they have paid.

Rates

There are three rates of VAT, depending on the goods or services the business provides. The rates are

  • standard: 20%
  • reduced: 5%
  • zero: 0%

There are also some goods and services that are

  • exempt from VAT
  • outside the UK VAT system altogether

Further information on VAT rates can be found on the GOV.UK website.

Chart 2: Incorporated companies lead in both population size and taxable turnover in the tax year ending March 2020.

Proportion of VAT population and annual taxable turnover by type of business for the tax year ending March 2020.

  • Incorporated companies accounted for the largest share of the VAT population and annual taxable turnover. This group accounted for 72% of traders, and 91% of annual taxable turnover in the tax year ending March 2020.

  • Sole proprietors were the second largest group in terms of VAT population; this group accounted for 16% of VAT traders. However, the annual taxable turnover declared by this group only accounted for 1% of the total for the tax year ending March 2020.

VAT population by trade sector

Trade sectors

The trade sector is recorded using the United Kingdom Standard Industrial Classification of Economic Activities (SIC), a classification of the type of economic activity in which an entity is engaged. The trade class for each trader is related to the sector of the economy in which the trader’s main economic activity occurs; hence the VAT population SIC breakdown cannot be taken as the exact economic activity of each trade sector.

Chart 3: The Wholesale and Retail sector remains the largest sector in the tax year ending March 2020.

Contribution to net Home VAT liabilities from the top 10 trade sectors.

  • The Wholesale and Retail sector was the largest in terms of contribution to VAT liabilities. Net Home VAT liabilities were £29 billion, equating to 26.7% of the total for the tax year ending March 2020.
  • Electricity, Gas, Steam and Air conditioning sector has replaced Other Services sector in the top 10 trade sectors from the previous year

Chart 4: Out of the top contributing sectors, all have seen increases from the tax year ending March 2019 except for the Accommodation and Food service, Real Estate Activities and the Construction sectors

  • The Professional, Scientific and technical activities sector increased by £860 million (5%), the largest year-on-year change.

  • The Real Estate Activities sector decreased by £530 million (12%) and the Construction sector decreased by £160 million (3%) year-on-year, although both sectors remain in the top ten sectors in terms of contribution to VAT liabilities.

VAT population and net Home VAT by turnover

VAT population by annual turnover bands for the tax year ending March 2020.

The sum of the percentages below does not equal 100%, as the percentage of traders by turnover band is calculated using the total number of traders. This total number also includes traders where the turnover band is ‘Unknown’, which are not included in chart above, but account for 4.2% of traders.

Chart 5: Traders with £1 turnover up to threshold led with the largest number of traders

46.7% of traders declared annual turnover below the VAT registration threshold (inclusive).

Chart 6: Traders with a turnover greater than £10 million led in net Home VAT in the tax year ending March 2020.

Net Home VAT by annual turnover bands for the tax year ending March 2020.

Traders with an annual turnover greater than £10 million declared £67 billion in net Home VAT, 62.2% of the total for the tax year ending March 2020. This group only accounted for 1.5% of traders (see chart 5).

Payments and repayments

Payment position

Home VAT payment traders are defined as those VAT registered businesses that are VAT payers, which means their net VAT is positive across the financial year. Conversely, Home VAT repayment traders are defined as those VAT registered businesses that are VAT re-payers, which their net VAT is negative across the financial year.

Chart 7: Over 75% of traders were in a net payment position in the tax year ending March 2020.

Net payment traders decreased by 0.2%, and net repayment traders increased by 1.1% compared with the previous financial year.

Chart 8: More than half of net Home VAT payments are accounted for by traders in the top 0.5% in the tax year ending March 2020.

Net Home VAT payments declared by VAT payers, by payment size for the tax year ending March 2020.

  • Total net Home VAT payments declared by VAT payers were £183 billion in the tax year ending March 2020.

  • The top 20% accounted for £168 billion (92%) of this total; the top 0.01% accounted for £43 billion (23%).

Chart 9: Distribution of net Home VAT repayments remains similar to the tax year ending March 2019.

Net Home VAT repayments declared by VAT re-payers, by repayment size tax year ending March 2020.

  • Total net Home VAT repayments declared by VAT re-payers were £75 billion in the tax year ending March 2020.

  • The top 20% accounted for £73 billion (97%) of this total; the top 0.01% accounted for £16 billion (22%).

VAT population changes

Chart 10: New registrations decreased in the tax year ending March 2020 after increasing in the tax year ending March 2019. De-registrations continue to decrease in the tax year ending in March 2020.

Registrations and de-registrations of traders from the tax year ending in 2011 to the tax year ending March 2020.

  • New registrations increased steadily from the tax year ending March 2011 to the tax year ending March 2017, since when they have shown no clear trend.

  • De-registrations were below 200,000 a year from the tax year ending March 2014 to the tax year ending March 2016, but increased above that level in the tax year ending March 2017, increasing further in the tax year ending March 2018. This increase in de-registrations was likely to be linked to policy changes in relation to the Flat Rate Scheme (see below). De-registrations decreased in the tax year ending in March 2019 and again for the tax year ending March 2020, which may be linked to the freeze in the VAT de-registration threshold from the tax year ending in March 2019.’

VAT Flat Rate Schemes

The VAT Flat Rate Scheme (FRS) was introduced in 2002 to simplify VAT for businesses with an annual turnover up to £150,000, tax exclusive. Further information can be found on the GOV.UK website.

Chart 11: The number of Flat Rate Scheme traders increased in the tax year ending March 2020 after year on year decrease since the tax year ending March 2016.

Number of Flat Rate Scheme (FRS) traders over the last ten years.

  • The number of FRS traders doubled between the tax year ending March 2012 and the tax year ending in March 2016.

  • As mentioned above, the decrease in the number of FRS traders between the tax year ending in March 2016 and the tax year ending in March 2019 is likely to be linked to policy changes in relation to the scheme.

  • The number of FRS traders increased slightly in the tax year ending 2020.

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