SMEs want lower VAT rate

A recent survey that was held amongst the owners of small businesses has suggested that the government should have left the level of VAT at 17.5% rather than reduce it to 15%.  In the pre-budget report from Chancellor Alistair Darling, the news that the rate of VAT will be temporarily reduced by 2.5% form the 1st of December has got business owners in turmoil.

Larger companies are battling to change such things as systems price lists and advertising, the small business owner is finding life extremely difficult. The survey, held on the ‘UK Business Forms’ website, asked the seemingly simple question of whether the it was a good idea by the government to implement this VAT reduction. Once all the votes were in, the clear majority said that that there should be no change.

Some of the main reasons given for not making the change are as follows; one business owner said he couldn’t even comprehend how many hours it was going to take to change all the shop and supermarket prices throughout the UK. This would inevitably mean overtime and the workers thus paying more tax. Many feel that the reduction is simply too small but European Legislation decrees that VAT cannot be lower than 15%.

The positive side was that those who agreed with the reduction said that it was going to be a lot easier to calculate 15% on prices rather than trying to work out the savings that the customer would make by paying 2.5% less VAT. Whilst the hands are tied in Euro red tape over VAT levels, some countries are bound by much stricter rules than the UK.

In Belgium, companies are only allowed to have 2 sales a year, in January and July, and are banned from having any kinds of reductions at any other times in the years. At least stores in the UK have the freedom to hold sales or drop their prices whenever they see fit. The whole business of reducing the VAT to 15%, however, does seem to have left the majority of small business owners somewhat nonplussed.