Everyone is speculating how Rachel Reeves will try and fill the alleged 20 billion shortfall.
Pension pot cutbacks, imposing a housing levy and targeting the middle classes with heavy taxation? These are just some of the strategies being bandied about. But, without a doubt the most significant is the VAT tax raid.
Currently small businesses with a turnover of less than £90,000 are exempt from registering for VAT, but this threshold is purported to be significantly lowered bringing a staggering numbering of SME’s into this bracket. Many describe trading over the threshold as a “Cliff Edge” scenario, whereby just a few pounds over the limit can prove to be a significant liability.
SME’s will face a difficult choice: Do they reach the threshold and register for VAT, or do they purposely limit growth to avoid the tax implications? This could mean working a 4-day week, suspending work if the turnover nears the threshold, or even turning down work and choosing what to take on.
To put this into perspective, currently the difference between £89,000 and £90,001 can be £14, 000 in VAT.
Whatever measures Directors choose to take, there is no question this will have huge implications for entrepreneurs, SME’s and communities alike,
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