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Change back to old VAT rate should be ‘delayed’

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The government should consider switching the date on which the standard rate of VAT moves from 15 per cent to its former level of 17.5 per cent.

The Chancellor’s intention is for the rate to revert to 17.5 per cent on 1 January 2010.

However, the Association of Chartered Certified Accountants (ACCA) has called on the Chancellor to consider extending the VAT cut into early 2010.

The ACCA said that it believed that the planned switchover date could have an adverse impact on businesses as it falls at the end of the calendar year when many small businesses are busy.

For this reason, the government should look at pushing the date further in 2010, perhaps as late as February, and should make any announcements as soon as possible rather than leave them until the autumn pre-Budget report.

Chas Roy-Chowdhury, head of taxation at ACCA, says: “This potential VAT changeover date needs to be moved well into the New Year, ideally February.

“We have to be mindful that SMEs will be dealing with tax returns at the end of the tax year and payroll returns will come around in April. It all just goes to show how relentless planning, finance and tax issues are for SMEs.”