Threshold setting in UK trade statistics compilation Event Name Here 12/02/2007 Threshold setting in UK trade statistics compilation Trade Statistics Presented by Mark Ellis Project Name: HMRC v1.8

Why Thresholds and what types? Reduce burdens on economic operators (statistical providers) while retaining quality Exemption Thresholds – defines the value above which taxable persons are required to provide Intrastat data (mandatory) Simplification Thresholds – defines the value below which taxable persons can be exempted from providing some Intrastat data (optional and not used in UK) Individual transaction Thresholds – allows Member States to permit simplifications to low value transactions (optional but used in UK) Specific “optional variable” thresholds for additional data items, e.g. Delivery terms Thresholds – requires operators to provide delivery terms data under certain circumstances (optional but used in UK)

Exemption Thresholds EU legislation requires Member States to collect Event Name Here 12/02/2007 Exemption Thresholds EU legislation requires Member States to collect 93% by value of intra-EU trade for Arrivals and 97% by value for Dispatches We set national exemption thresholds to collect the required percentages Traders whose intra-EU trade exceeds these thresholds must submit Intrastat declarations We review annually to ensure we continue to meet legal requirements Separate thresholds for dispatches and arrivals For 2014, UK thresholds are Arrivals - £1.2m Dispatches - £250k Project Name: HMRC v1.8

Factors affecting the threshold Reasons why threshold may change Forecasting of the threshold and VAT data show steady increase/decrease, influenced by; External information from the Bank of England on GDP and inflation Exchange rates The economy of the 17 nations in the euro A drop in the EU capture rate e.g. Arrival capture rate dropped from 95% to 93% for 2014

Methodology on Threshold calculation – How? 2 Stages Stage 1 - Analysis of VAT data UK VAT return data for the last three years is examined 36 historical 12-month rolling cycles used to analyse trends in VAT data Threshold calculated for each rolling 12 month cycle Stage 2 - Extrapolation Forecasts a threshold for the next calendar year assuming linear growth Accounts for probable effects of inflation, trade growth and other factors Resulting model is tested by estimating the threshold values for those 36 12 month periods

Forecasting of the arrival threshold Event Name Here 12/02/2007 Forecasting of the arrival threshold Chart shows the forecasting of 2014 Arrivals threshold using 93 per cent threshold for one, two and three years’ data. The one year forecast shows only slight increases compared to the upward trend for the two year and three year forecast. Similar forecasting is done for the dispatches threshold Source: HMRC Overseas Trade Statistics Project Name: HMRC v1.8

Forecasting of the dispatches threshold Event Name Here 12/02/2007 Forecasting of the dispatches threshold Chart shows the forecasting of 2014 dispatches threshold using 97 per cent threshold for one, two and three years’ data. Apart from the three year forecast which is fairly flat, the one year and two year forecast shows downward trend. This is due to slow economic delivery Source: HMRC Overseas Trade Statistics Project Name: HMRC v1.8

Analysing the effect of threshold change on arrivals and dispatches Event Name Here 12/02/2007 Analysing the effect of threshold change on arrivals and dispatches Table 1 : The effect of threshold on Arrivals and Dispatches for the period Jul 2012_Jun 2013 Threshold Number of Arrival traders Number of Dispatches traders Combined traders Arrivals Dispatches  600,000 250,000 15,597 18,702 27,009 600,000 300,000 17,026 25,653 900,000 12,514 23,488 1,200,000 10,527 17,371 21,753 275,000 16,497 20,979 15,773 20,336 350,000 14,538 19,245 The table shows the effect of potential new thresholds on the current data for arrivals and dispatches. It provides information on potential reductions in the number of Intrastat traders. We then examine the Source: HMRC Overseas Trade Statistics Project Name: HMRC v1.8

How Eurostat calculate UK capture rate The Table shows how Eurostat calculated UK compliance with legal requirements. From 2010 to 2012, UK has been under-collecting the required 95% target for arrivals. As for dispatches, UK met the target of 97% in 2011 and 2012.

Delivery Terms (DT) Threshold Event Name Here 12/02/2007 Delivery Terms (DT) Threshold UK collects invoice value data and uses the DT to convert to statistical value Only PSI who are above the DT threshold are required to submit DT UK DT threshold set to £24m in 2014 Methodology Same process as the exemption threshold Threshold is set to request information only from those traders who account for 70% of total Intrastat value This is around 5%-6% of total population (e.g. 1500 out of 24000 traders) Only one DT threshold is calculated for both Arrivals and Dispatches, whichever is lower As the UK collects invoice value and converts this to statistical value, it sets the Delivery Terms Threshold in order to collect sufficient data in order to do the conversion through the ACS factors. To reduce the burden on lower value traders, the Delivery Terms Threshold is set at a level so that around 70 per cent of total Intrastat value is collected with delivery terms. This places the declarative burden on around the largest five per cent of traders only Project Name: HMRC v1.8

Thank you – any questions? HM Revenue & Customs 21 Victoria Avenue Southend-on-Sea SS99 1AA Telephone no. 03000 593339 mark.ellis@hmrc.gsi.gov.uk