600,000 Small Firms Fear VAT Shake-Up
In a major shake-up to the country’s VAT, up to 600,000 of small businesses who are currently under the tax threshold may have to start charging it on their goods. Certain goods and food items could also start incurring the tax for the first time.
Small companies with a turnover under £85,000 a year do not presently have to charge VAT on goods and services they sell, but the Chancellor of Exchequer has proposed to reduce this to £43,000.
The government’s plans for the Value Added Tax (VAT) are predicted to go further, with fines for overdue paperwork and red tape on small businesses in line to be scrapped.
However critics are weary of Chancellor of Exchequer, Richard Hammond’s, ambitions, with the reduced threshold giving Hammond an extra £1.5 billion a year, according to recent reports.
Mike Cherry of the Federation of Small Businesses warned the Exchequer of doing anything to damage small firms. Cherry fears the “hugely negative impact” that will come from such a shakeup in the current backdrop of Brexit uncertainty.
Many firms are reluctant to expand their business in fear of reaching the VAT threshold, and are sure to be discouraged further if the threshold is cut.
The shakeup is part of a government effort to make the VAT process simpler, but many fear the increased costs for consumers.
There is much confusion over which consumer goods items are exempt from the tax, and Britain is likely to have more freedom to decide which are exempt after we leave the EU.
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