Small and medium-sized businesses across the country believe that they could see excellent results from a reduction in VAT. New research from Sage found that most UK SMEs believe that cuts to VAT would improve their earnings and the economy.
The survey shows that over three quarters of small and medium UK businesses are concerned that sales tax is too high. UK sales taxes are currently 20 per cent. Over 40 percent of the firms surveyed claim that a reduction of VAT to 10 per cent will help them retain staff and improve their earnings.
VAT was raised in 2011 from 17.5 per cent, which over a third of businesses claim is the ideal sales tax rate. More than half of the businesses surveyed claimed that sales taxes need to be cut by over 5 percent in order to improve small business earnings.
Small and medium-sized businesses are concerned not just by the rate of VAT, but by the complicated nuances surrounding VAT refunds. Many businesses claim that they aren’t certain that they are receiving all that they’re entitled to when claiming back VAT.
Value-added taxes have been called an ‘Achilles’ heel‘ for small businesses by Sage managing director Lee Perkins. The taxes remain a key concern for many UK small and medium businesses due to the complexity in accounting that they result in.
Despite the concerns of many businesses, analysts believe that a reduction in VAT is unlikely to come in the near future. As the economy is seeing long-term growth, the importance of reducing VAT and improving small business development simply isn’t a major priority for the government.
Because of this, SMEs should instead focus on making sure that they’re compliant with the current VAT rules, and that they are getting a fair deal under the current system.
