the business ladder

Up to 35,000 work opportunities could be created through small companies if the threshold of VAT was increased, according to research carried out by the Centre For Economics and Business Research for the Federation of Small Businesses (FSB).

The research suggests that £162 million in costs and £700 million in payments could be saved for small businesses if the VAT threshold is increased from £70 000 to £90 000. 

"The smaller the business, the higher the cost of VAT compliance," said John Walker, FSB chairman, as indicated by TheBusinessDesk. "This is why the FSB is calling for the Government to increase the threshold at which a business must register for VAT."

Additionally, he stated that "If the Government is truly committed to a private sector led recovery, then it must implement a small business programme for growth to allow small firms to grow and invest - and this would be a great start."

If VAT rises to 20%, £13 billion of revenue is anticipated, the outcome of which would be the creation of new working positions. The research suggests that this could balance out any losses that the Treasury may experience.

Mr Walker further asserted that "The potential loss to Government in VAT receipts by increasing the threshold to £90,000 would be more than outweighed by the VAT rise due to come into force in January, and would help to put £900 million back into small firms with the potential to create up to 35,000 jobs."

The FSB - which has 210,000 members - recently expressed concerns over small businesses which it says will be "hard hit" by the VAT rise in January.

The organisation claims that smaller firms cannot absorb the costs as easily as larger corporations, and instead will be forced to pass on the costs to their customers, reduce stock levels, or find cost savings elsewhere, which the FSB claims will "cost jobs and undermining the Government's private sector led recovery."

 

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