VAT was probably the most closely watched figure in the latest Exchequer receipts (for July).
On the positive side, VAT receipts were strong for the month, indicating perhaps surprisingly that spending in the early summer months wasn’t unduly impacted by Brexit uncertainty. It also suggests that VAT figures would be particularly robust were it not for the Brexit impasse.
However, at this point it’s difficult to see VAT receipts not being adversely impacted over the next few months, regardless of the Brexit outcome. This could leave a gap in the year end Exchequer figures, unless that gap can be bridged by surpluses elsewhere.
Corporate tax is the most likely tax head to generate a surplus in the year to plug any holes elsewhere, although uncertainty remains over future receipts. November is the critical month for corporate tax, with the June and July figures giving some hope of strong returns later in the year.
July was a weak month on the income tax front but the Department has put this down to a timing issue, so we should expect to see this clawed back in the coming months.
In summary, uncertainty best represents the picture for the remaining months of the year, with both corporate tax volatility and Brexit uncertainty the key factors. Hence the scope for any significant tax cuts in October looks uncertain.
