As the Autumn Budget approaches, small businesses worry that one method of raising revenue for the Government may be to lower the VAT thresholds.
Research from the FSB finds that doing so may mean more work for SMEs, as it was revealed that VAT-registered SMEs spend the equivalent of one working week every year complying with their VAT obligations.
Six Working Days Sacrificed to VAT
The FSB survey found that VAT-registered small business owners spend an average of 44 hours a year – the equivalent of six working days – handling their VAT.
The research identified the most time-consuming elements of VAT adherence as:
Correctly calculating the proportion of VAT owed (43%)
Filling out VAT returns (17%)
Researching guidance (10%)
Mike Cherry, FSB national chairman, said: “Once again small firms and the self-employed fear the Chancellor could single them out for a tax grab at the Budget, this time by forcing more of them into the VAT regime.
“Doing so would create a real drag on business output.”
He added: “At a time of spiralling costs and persistent uncertainty, a lowering of the VAT threshold is the last thing our entrepreneurs need.”
Taxing Problems – and Solutions
The research revealed that over a quarter of firms (27%) find VAT difficult to understand, with only 5% describing it as very simple to grasp.
Asked about what made VAT so difficult to understand, common culprits were:
understanding are different exemptions (53%)
establishing the rate at which payment is required (24%)
different thresholds (21%)
If you struggle to understand and administer your VAT, you could save yourself a great deal of time, stress and money in terms of lost revenue by letting an accountant handle your VAT administration for you.
They are the experts and have this information at their fingertips, ensuring you pay as little tax as possible and advising you on the best way to handle VAT.
Hiring and working with an accountant is probably cheaper than you think. For instance, at The Accountancy Partnership we combine reasonable rates with access to our cloud accounting system, Pandle, which helps you and your accountant access your up-to date financial information anytime, anywhere.
Mr Cherry added: “The registration cliff-edge remains a concern for many firms, but making huge swathes of businesses and the self-employed join the hugely complex VAT regime is not the answer.
“The Chancellor should be prioritising simplification, rather than expansion, of VAT and the tax system at large.”
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