A study of 1000 business owners carried out by Bibby Financial Services revealed that 40 percent want VAT reduced to return to 17.5 percent. In January 2010, the rate of VAT was increased from 17.5 to 20 percent in a contentious move by the Chancellor. As businesses have weathered a rocky 2011, they are facing an uncertain 2012 and a large number of business owners believe a VAT reduction will help them progress in the New Year.
The rate of VAT was originally increased to reduce the public deficit, believed by the Chancellor of the Exchequer George Osborne to be more efficient than increasing income tax and National Insurance. However, the Bibby Financial Services’ UK chief executive, Edward Rimmer, believes that the VAT rise pushed up the cost of business resources, impacting negatively on the level of spending by businesses. He also pointed out that the latest retail figures for the Christmas period indicate that consumers spent less in reaction to the higher price of goods. He said:
“The rise in VAT has been a punitive measure for small to medium-sized businesses and among the 4000 clients we work with and provide funding for in the UK, we are consistently being told that reducing the rate back to 17.5 percent would be a welcome move.”
As a large number of business leaders believe that the UK is close to another recession, the government must do more to support small businesses. In addition to VAT reduction, 34 percent are calling for greater incentives to recruit and 29 percent would like the 50p tax rate abolished.
Want to learn more?
Subscribe to our newsletter to get accounting tips like this right to your inbox