Small businesses coping with VAT increase
Small firms appear to have taken the recent hike in VAT in their stride.
The standard rate of VAT climbed from 17.5 per cent to 20 per cent on 4 January amid concerns at the effect it would have on smaller traders.
However, a new survey, conducted by Intuit, a financial software provider, found that a majority of businesses polled (67 per cent) had experienced no adverse impact as a result of the change.
Four out of ten businesses (39 per cent) had opted to shoulder the additional cost of the increase rather than pass it on to their customers.
Taking into account not only absorbing costs but also the extra administrative effort required to manage the tax shift and any loss in income, 70 per cent of respondents nevertheless reported that the new rate of VAT had dented their revenue by no more than £350.
Only 46 per cent said that they had invested more than five hours work in preparing for the changeover.
Asked if they believed that the VAT hike was the best tax increase for dealing with the budget deficit, almost half (44 per cent) agreed.
Just 13 per cent voted for a rise in income tax as a more effective measure.
Pernille Bruun-Jensen, managing director of Intuit, said: “It’s reassuring to know that many small business owners have been able to cope with the recent VAT increase despite widespread predictions of doom and gloom.
“As this is the third VAT rate change in less than three years, those business owners who have been around for a while may feel that they have had enough practice to cope with the changes.
“Small Business Britain is a huge driver for the UK’s economic recovery, and so it’s important that the government continues to listen to and address their needs in order to tackle the national deficit.”