The Institute of Chartered Accountants in England and Wales (ICAEW) has urged HMRC to abolish all VAT exemptions and remove all VAT options, following their consultation on simplifying the rules relating to land and property.
They say that VAT rules regarding land and property are ‘unnecessarily complex’ and would benefit from ‘significant simplification’. The Institute also highlighted the need for a more fundamental review of VAT exemptions.
The ICAEW also argued that abolishing exemptions would remove the difficulties for businesses posed by a partial exemption. They suggested that all land and property transactions should be subject to VAT at the standard rate or reduced rate, other than those relating to domestic property, which should remain zero-rated.
In regard to the removal of all VAT options, the ICAEW commented: ‘Any option, whether it be to tax or exempt a transaction, creates complexity and uncertainty, as there are then two possibilities for the VAT liability of what is essentially the same type of supply.’