diff --git a/changelog.d/1320-firm-vat-page-corrections.changed.md b/changelog.d/1320-firm-vat-page-corrections.changed.md new file mode 100644 index 0000000000..87cc5feab1 --- /dev/null +++ b/changelog.d/1320-firm-vat-page-corrections.changed.md @@ -0,0 +1 @@ +Corrected the firm-level VAT planning page (`docs/book/programs/gov/hmrc/firm-vat.md`): #1333 is closed as a duplicate of #1320, the proposed `Firm` entity no longer names a non-existent `state` containing entity, the data table now says FRS self-employment income is profit rather than turnover and that the FRS carries a main-job SIC division, and turnover-band counts come from ONS *UK business: activity, size and location* rather than Business demography. diff --git a/docs/book/programs/gov/hmrc/firm-vat.md b/docs/book/programs/gov/hmrc/firm-vat.md index 9ae9e79977..b06be28580 100644 --- a/docs/book/programs/gov/hmrc/firm-vat.md +++ b/docs/book/programs/gov/hmrc/firm-vat.md @@ -7,9 +7,10 @@ consumption*: the `vat` variable applies `gov.hmrc.vat.standard_rate` and spending (`full_rate_vat_consumption`, `reduced_rate_vat_consumption`), then grosses the result up to VAT receipts. There is no business side. This page sets out the scope for adding firm-level VAT and a `Firm` entity, tracked in -[#1320](https://github.com/PolicyEngine/policyengine-uk/issues/1320) and -[#1333](https://github.com/PolicyEngine/policyengine-uk/issues/1333). Both -issues are still open (October 2026). +[#1320](https://github.com/PolicyEngine/policyengine-uk/issues/1320), which is +still open (October 2026). The companion analysis issue, +[#1333](https://github.com/PolicyEngine/policyengine-uk/issues/1333), was +closed on 20 October 2026 as a duplicate of #1320. ``` ## Why firm-level VAT? @@ -84,17 +85,27 @@ Firm = build_entity( "key": "owner", "plural": "owners", "label": "Owner", - "doc": "Person or household that owns the firm.", + "doc": "Person who owns the firm.", } ], - containing_entities=["state"], + containing_entities=[], ) ``` The `containing_entities` set deliberately does *not* include `household` because incorporated firms have no household; the link for sole traders is via an explicit `firm_owning_household_id` input -variable rather than entity nesting. +variable rather than entity nesting. (The existing `Household` and +`BenUnit` entities list a `"state"` containing entity, but PolicyEngine UK +has no `state` entity, so the firm should not copy it.) In policyengine-core +only people can be members of a group entity, so the owner role holds people. +Core also places each person in exactly one instance of every group entity, +so a person cannot own two firms and everyone belongs to some firm: a +situation that lists firms gives anyone it leaves out a one-person firm, one +that lists households but no firms puts all its people in a single firm, and +a dataset build must assign every person a firm. The design therefore needs +a way to represent people who own no firm and incorporated firms with no +owner in the data. ### Variables @@ -144,27 +155,25 @@ component sits against our current data: | Component | Public source | FRS coverage | Datalab source | |-----------|---------------|--------------|----------------| -| Firm turnover distribution | ONS *Business Demography* | sole-trader / partnership turnover via FRS self-employment income | HMRC Datalab: anonymised VAT returns | -| Industry sector | SIC codes from ONS *Inter-Departmental Business Register (IDBR)* | not in FRS | HMRC Datalab | +| Firm turnover distribution | ONS *UK business: activity, size and location* | sole-trader / partnership profit (not turnover) via FRS self-employment income | HMRC Datalab: anonymised VAT returns | +| Industry sector | SIC codes from ONS *Inter-Departmental Business Register (IDBR)* | main-job SIC 2007 division only (`sic_industry_division`); no firm-level sector | HMRC Datalab | | VAT registration share | HMRC *VAT statistics* (annual) | not in FRS | HMRC Datalab | | Input VAT shares | ONS *Supply and Use tables* | not applicable | HMRC Datalab | ### Proposed imputation approach -1. Build a **synthetic firm panel** weighted to ONS Business Demography - counts by SIC sector and turnover band. +1. Build a **synthetic firm panel** weighted to ONS *UK business: + activity, size and location* counts by SIC sector and turnover band. 2. Attach to each firm a registration status, supply split, and intermediate-consumption ratio drawn from HMRC VAT statistics and ONS Supply and Use tables. 3. Calibrate the panel so that summed `firm_net_vat_liability` matches - the HMRC VAT receipts outturn for the year. This mirrors the - second-stage imputation pattern discussed in - [#1621](https://github.com/PolicyEngine/policyengine-uk/issues/1621). + the HMRC VAT receipts outturn for the year. 4. For sole traders and partnerships, link the synthetic firm row back to the FRS household that owns it via self-employment income. -The companion repo [`policyengine/uk-vatlab`][vatlab] hosts the analysis -files (#1333) used to size each step before they are productionised. +The companion repo [`policyengine/uk-vatlab`][vatlab] hosts the firm-level +VAT analysis files linked from #1333. ## Effort estimate @@ -193,10 +202,10 @@ files (#1333) used to size each step before they are productionised. ## References -- HMRC, [VAT rates](https://www.gov.uk/vat-rates) and [VAT registration thresholds](https://www.gov.uk/vat-registration-thresholds). +- HMRC, [VAT rates](https://www.gov.uk/vat-rates) and [VAT thresholds](https://www.gov.uk/how-vat-works/vat-thresholds). - [Value Added Tax Act 1994](https://www.legislation.gov.uk/ukpga/1994/23/contents): primary statute. - HMRC, [VAT statistics](https://www.gov.uk/government/statistics/value-added-tax-vat-annual-statistics): annual outturn used for calibration. -- ONS, [UK Business: Activity, Size and Location](https://www.ons.gov.uk/businessindustryandtrade/business/activitysizeandlocation) (the IDBR-based business demography release). +- ONS, [UK business: activity, size and location](https://www.ons.gov.uk/businessindustryandtrade/business/activitysizeandlocation/datasets/ukbusinessactivitysizeandlocation): counts of VAT- and/or PAYE-based enterprises by industry (SIC) and turnover band from the Inter-Departmental Business Register (IDBR). - ONS, [Supply and Use tables](https://www.ons.gov.uk/economy/nationalaccounts/supplyandusetables): intermediate consumption shares. - Companion analysis repo: [`policyengine/uk-vatlab`][vatlab] (#1333).