VAT rule change ‘could create jobs’

At the moment firms pay VAT if they turnover more than£70,000 but the Federation of Small Businesses (FSB)believes 35,000 jobs could be created UK-wide if that threshold is increased to £90,000.

The FSB’s Beds Cambs & Herts chairman, Ian Cording, said: “The smaller the business, the higher the cost of VAT compliance; this is why the FSB is calling for the government to increase the threshold at which a business must register for VAT.”

Mr Cording says the VAT rise from 17.5 per cent to 20 per cent on January 4 - itself due to put firms under strain - would produce £13 billion, vastly more than the £700 million it would cost government to raise the threshold.

Mr Cording added: “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.”

He added: “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.”

The red tape surrounding VAT compliance is itself estimated to cost UK businesses up to £162 million per year.

The FSB reckons that increasing the VAT threshold would help firms create much-needed cash-flow, allowing them to invest back into the business through lower prices or taking on more staff.

> A Programme for Growth is even more important given that latest FSB research shows that 10.4 per cent of firms expect to decrease employment over the final quarter of the year, as business confidence in future prospects and revenue growth weakened over the July to September period.