On Monday 29th October, Philip Hammond – Chancellor of the Exchequer – will be announcing the UK budget for the next financial year. This year the budget is particularly noteworthy as it’s the last one before the country begins Brexit negotiations. It’s certainly one for small businesses to keep an eye on, as its been predicted there’ll be changes that will impact them. Will your business be affected by these proposals?
Firstly, it should be made clear to you what exactly these proposed value added tax changes are. Mr Hammond is looking into cutting, or possibly extending, the current £85,000 VAT threshold. This is because it prevents companies from growing, or companies end up lying to avoid going over the tax line. The chancellor believes these changes could save the Treasury £2 billion a year.
The Federation of Small Business confirmed these changes could be good news for small businesses. This is because most wouldn’t be earning that figure within their first few years of trading so wouldn’t be forced into going through all of their VAT receipts. The proposed changes could save a small buisness hours and hours worth of administration time.
However, unfortunately, the proposed changes are not a guaranteed good move for all small businesses. Currently, 55% of businesses fall outside the threshold, if it were to drop a great deal more of small business would be included within it. This could mean a small company would have to raise the price of their products so the increase in VAT they pay is covered by the customers. Or they could swallow the costs themselves, which could potentially be lethal for their budget.
As previously discussed, if the budget was to stay the same this would mean small business could save valuable hours of work on completing administration. However, if the threshold is to lower this could end up costing them even more. They could potentially have to hire additional help to aid with them all the extra administration needed of sorting out the VAT receipts. If a small business is unsure about trading laws, ATC Brokers can help offer expert advice. They can have help you tackle the new regulations and your business can become even better in the long run.
Room to Grow
Depending on whether the VAT threshold is lowered or frozen will impact a small business’ opportunity to grow. With the current £85,000 VAT threshold businesses will take steps to make sure they don’t go over it. Even if this means closing more or purposely losing sales. However, with a lower threshold, it will automatically mean more businesses are included. Since they’re already over the threshold, they’ll want to earn more money in order to make more profit.