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Claire’s Column – VAT Trap

In this regular column – a must-read for all those interested in Guildford business – Claire Dee opposes a potential VAT change in the forthcoming Budget.

This month on November 22 brings Budget Day. When the Chancellor of the Exchequer, Philip Hammond, will set out the government’s plans for the economy based on the latest forecasts from the Office for Budget Responsibility (OBR).

Claire Dee.

This new format means the government’s main fiscal event of the year is now in the autumn, allowing plenty of time for changes to be absorbed and adopted for the new financial year in April. In the past, Budget Day has been in March, making these timings unrealistically tight. Instead, there will be a simple fiscal update statement in the spring.

While the timings have changed, the anticipation and banter in the run-up hasn’t. Already, we are seeing predictions from various business lobby groups and calls for clarity, simplicity and fiscal finesse.

Having led many such campaigns myself when working up in London, I wholeheartedly support them and recognise their need and the debate they create. Which is how I learnt that a significant shake-up to the VAT threshold for small businesses could be coming. Something they really don’t need. Guildford is full to bursting with entrepreneurs steadily growing such businesses and this change will not be welcomed.

At present, companies with a turnover of under £85,000 are exempt from charging VAT on their goods and services. However, there are now rumours that the Chancellor’s Budget could reveal this threshold will be reduced to £43,000 or even £20,000. This would drag many into the onerous and complex task of VAT reporting which they simply don’t have the time or resource to do.

As Mike Cherry of the Federation of Small Businesses (FSB) said: “Complying with VAT obligations is massively time-consuming for small firms. Small firms aren’t like big corporations – they don’t have accounting expertise on tap.

“Our small business owners should be spending their time and money growing their firms, not navigating an array of different VAT schemes and an inconsistent list of exemptions as long as your arm. VAT should also not be used as a back-door to bringing more firms into mandatory quarterly tax reporting.”

Hear, hear. In fact, Mr Hammond, why not raise the VAT cap instead? From £85,000 to £100,000 would do nicely.

Claire Dee runs her own communications consultancy near Guildford and is an active member of the local business community, including sitting on the Surrey Chambers of Commerce board and co-chairing the Business Women in Surrey group. To learn more visit www.clairedeecommunications.com

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