Calls for leeway on VAT cut
The Forum of Private Business (FPB) has called on the Government to give small firms some leeway on implementing the recent cut in VAT.
Following the Government’s decision to cut the rate of VAT from 17.5% to 15% from 1 December until January 2010, the FPB has warned that small firms will face an increased administrative burden when they calculate the amount of VAT to charge on their goods and services.
The FPB said that firms will have to re–price their goods and services to account for the new VAT rate, and will need time to complete the complex tax return calculations that will result from the VAT rate changes. FPB spokesman Phil McCabe said:
“The difference between small firms and big business is that larger companies have the resources to bring these changes in quickly”
At present, businesses are legally required to send invoices out within 14 days of their goods and services being supplied to customers. The FPB has suggested that this period be extended to 30 days during December to give small firms the opportunity to calculate invoices to take the new 15% VAT rate into account.
The FPB has also urged the Government to apply a ‘light touch’ to businesses that make genuine errors in their VAT returns. When filing tax returns, the old VAT rate will apply to part of the tax year, while the new rate will apply for the period 1 December 2008 to 1 January 2010.
Responding to the proposals, an HM Revenue & Customs spokesman said:
“We are providing a number of resources with information via our website so that businesses can understand what is involved and how they can implement the VAT cut and pass the savings on to customers.”
For more information on implementing the VAT changes, access the Business Payment Support Service on the HMRC website or access the HMRC telephone helpline on 0845 302 1435.
For information on Tax and how it affects your business, read our Tax and National Insurance Guide