SME Business News

The FSB has discovered that 48 per cent of business sectors have seen a rise in the level of flat rate VAT they pay

The Federation of Small Businesses (FSB) has discovered that the flat rate VAT charged by HMRC to the smallest of businesses has risen to a higher level and the FSB has urged the Government to review the issue in its Budget submission to the Chancellor this week.

Flat rate VAT is charged to the smallest businesses with a turnover of less than £150,000 and aims to minimise the red tape around administering VAT providing a slightly lower rate which varies dependent on the sector the business operates in. In its Budget submission, sent to the Treasury this week, the FSB has called for the flat rate VAT to be immediately reviewed.

John Wright, National Chairman of the Federation of Small Businesses, said:

“When VAT was lowered in December 2008 many rates stayed the same and some were reduced by up to 2.5 per cent. What has become apparent is that after VAT was put back to 17.5 per cent in January this year, nearly half of the flat rate schemes have seen the VAT level rise above the pre-decrease level.

“While a few sectors have seen a decrease, the majority of businesses will see their rates rise, which is unacceptable at a time when cash-flow is limited. The FSB believes that this is a stealth tax, which will affect a firms overall profitability, deliberately directed at small businesses during the recession. The FSB believes there needs to be more openness in how these rates are calculated and when they rise.

“The Budget is the Governments chance to put flat rates back to 2008-levels and remove the additional tax burden imposed on small businesses.”