VAT and the SME
We take a look at how the Government’s VAT strategy may affect business.
Extending the reduced VAT rate of 15% until the end of December is welcomed by many. But with a plan to return to the 17.5% rate in January 2010 this may feel like a rise at a time when recovery is just on the horizon. The effective 2.5% increase in retail prices across the board may also combat deflation that reared its head for the first time in fifty years in March.
But the hidden cost for many businesses as they facilitate another VAT change – posters, printed prices and system updates – might be the real cost of a VAT hike. Money that might otherwise be spent on staff or investment in promotions will be swallowed up, just keeping up with the changes. It’s primarily because of this that many business owners are calling for the temporary 15% rate, to be extended until 2011.
