VAT Rate’s Return Bad News For Business

The Federation of Small Businesses (FSB) is calling for a delay in the return of the rate of VAT back to 17.5per cent, saying it is bad timing and bad for business. The FSB says that the timing of VAT rise - from its current 15 per cent due on New Year’s Day, will leave small firms with very little to celebrate. The Government is being urged to delay the rise until 1st February. As well as helping to keep tills ringing after the festive season this would be an easier time to administer all the price changes and updates. The British Retail Consortium, a lobby group for shop owners, is also pressing hard for the 2.5% rise to be delayed.

Chairman of the Wessex Region, Ken Moon, said: “Chancellor Darling has little to lose by delaying the restoration of the 17.5 per cent VAT rate for just one month, but this would help retailers during the January sales season. He might even be tempted to postpone the increase until after the next election, when it might not be his problem.”

Alistair Darling cut VAT to 15% in his 2008 pre-Budget report to help prop up consumer spending in the run-up to last Christmas. However, there are mixed opinions on the impact of the cut. The think tank Centre for Economic and Business Research claimed it boosted sales by £2.1 billion in the six months to April 2009 but the FSB said it had failed to lift sales for 97% of its members.