Businesses call for VAT increase to be reversed

At the beginning of January last year, the government increased the rate of VAT in the UK from 17.5% to 20%. Accountants may be interested to learn that business leaders are now calling for that increase to be reversed to help firms move forward this year.

Bibby Financial Services surveyed 1,000 business owners and found that 40% believe decreasing the rate to 17.5% would provide much needed help for SMEs.

The government introduced the 20% rate to help reduce the high budget deficit and at the time George Osborne said it was a more progressive move than increasing National Insurance or income tax.

The chief executive of Bibby Financial Services UK, Edward Rimmer, said the increase has been damaging to businesses because of the additional cost of essential resources. Furthermore, high street spending was also impacted as high prices put consumers off buying during the festive season.

He went on to explain that Bibby Financial Services works with around 4,000 clients and most of them are continually saying they would welcome a reversal of the increase.

Businesses need all the help they can get to stop the economy falling back into recession. 34% of businesses would like to see more financial incentives to encourage firms to take on more staff and 29% want to see the end of the higher rate 50p tax bracket.

Rimmer added that SMEs could find 2012 to be another difficult year if accessible funding solutions and effective practical support measures are not made available to them.

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