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VAT Increase???

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Gouldie0

New Member
With the new 'Coalition' government in place, it is expected that VAT will rise for the current 17.5% to 19% or even 20% during 2011 (if not sooner).

Whilst it may add only a small amount to the price of your services / products, will this benefit your non-VAT registered competitors (as they can market there services at a reduced rate) or will B2B customers and suppliers only want to deal with other VAT registered businesses.

I'm just wondering, how will this affect your business? What are your thoughts on the expected increase?

Kind Regards

Neil
 
Scottish Business Owner

Scottish Business Owner

New Member
Hi Neil,

I think it's kind of agreed that a VAT rise is inevitable. I have to say it's something I dont really mind happening given that it wont hit the consumer that much and it's raises a fair amount to try and address this massive deficit which quite rightly is where the immediate action is needed.

I know first hand that there is a level in business where certain businesses will only work with other businesses who have a good track record and stable financials, it might not be fair but that's what happens.

If the VAT rise helps towards moving to this £10K tax threshold on earnings then I think it's a small price to pay.
 
Mike Lewis

Mike Lewis

New Member
Neil,

I can't see how it will have much affect on competition. If your customers are businesses, the VAT is irrelevant. If they're consumers ... well, your competitors will be applying the same VAT rate as yourself.

If there is any effect, it will be to dampen consumer demand. But that didn't seem to be much of an issue during the recent temporary rise to 20 percent, so I don't see why it would be again.

Mike
 
Mike Lewis

Mike Lewis

New Member
Yes, I know ... I'm talking rubbish. I meant a temporary decrease to 15 percent, not an increase to 20 percent. My brain is getting addled.

But my main point remains: a small adjustment in VAT doesn't have a huge affect on demand.

Mike
 
The effect you're talking about Neil hits small solo tradesmen like motor mechanics, Plumbers handymen etc who are working on a tiny scale... Tradesment like that often have to face crossing that line if their business is to grow to any reasonable size..

Suddenly they have to put VAT on their labour rate and labour is the bulk of most invoices they issue... But that's an issue for these folk whatever the VAT rate is...

It won't benefit most non-VAT registered businesses becase of course they'll need to absorb the increase on their stock and their prices will go up in line with that.. I can think of very few B2B services that can operate under the threshold... The increase in VAT is at worst a cashflow issue for most businesses surely?
 
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Gouldie0

New Member
I think the main issue is cashflow and it's a question of do you absorb the increase in VAT or do you raise your prices. I guess it comes down to what type of business you are and how competitive the market is for the services you provide.

Mike, The temporary decrease in VAT was mean't to stimulate consumer spending. This in my opinion was a mistake of Labour's part as it only added to the already massive deficit.

I just wonder whether increasing VAT is the right thing to do at the moment.

I agree with , the move towards a £10k personal allowance is the right move but I think this should be paid through a cut back in benefits. The selling point being, go get a job and potentially you could earn a tax free wage.
 
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I agree with , the move towards a £10k personal allowance is the right move but I think this should be paid through a cut back in benefits. The selling point being, go get a job and potentially you could earn a tax free wage.

You could if there was work out there!

I agree that the move to a £10K personal allowance is a positive one... And ulltimately making it FEASIBLE to move off benefits will reduce the burden...

But a HUGE unspoken part of the benefits bill relates to keeping offices full of utterly useless numpties that serve no other function than to harass benefit recipients into chasing jobs that don't exist... The Pauline Campbell-Jones character from "League of Geltlemen" was perillously well observed from an actual restart officer that Reece Shearsmith had the misfortune to encounter while on the dole before becoming successful... And having spent a (mercifully short) time working in the Careers Service myself I can confirm that such 'types' are pretty much the norm...

The benefits system is also known to 'trap' people; ramping down secondary benefits such as housing and council tax too rapidly to allow for the fact it costs money to GET to work and maintian oneself in work...

As for things like the tax credit system.. That's just a mess! People are better off avoiding it since they can get into the common situation where they're paying more money back in 'overpayments' due to DWP error (they almost never get it right) than they're getting in tax credits... Net effect poor people that need help are having their already inadequate income reduced by the state...

And the whole sorry mess costs a FORTUNE!!!

I don't think increasing VAT is the way to go though... Simply because it'll hit those on the most marginal incomes the hardest!

Personally, I'd sooner pay a bit more on the higher rate tax and perhaps see the layers above that squeezed a bit more... My having to save up a bit longer to buy my next Mont Blanc is less of a price than some kid having to go without because their parent's marginal income has been squeezed just that bit too far...

If anything they need to be making moves that will reduce prices in the shops.. Especially for food and fuel...
 
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