SME's must rise to VAT challenge
Andrew Bullard, head of business at specialist factoring and invoice finance broker Cashflow UK discusses the huge impact on many small businesses of the UK Governments decision to raise the rate of VAT and other Budget changes.
THE Governments decision to raise the rate of VAT in this years budget 2010 will have a huge impact on many small businesses.
For the first time in history, the tax on many goods and services will rise to 20 per cent and small businesses will be forced to dig deep to make up the difference.
Andrew Bullard, head of business at specialist factoring and invoice finance broker Cashflow UK, said: The state of the economy meant it was already tough for small firms.
Now they will have to pay more to their suppliers and will be forced to pass this cost on to their customers, which could mean the difference between survival and failure for some.
The Government wanted to stimulate economic growth at grass roots level yet this is a backward step.
But the coalition Governments first Budget was not all bad news for small firms.
While the rate of National Insurance contributions will still rise as planned in April 2011, Chancellor George Osborne has raised the threshold at which employers start to pay it by £21 a week.
Companies outside London and the South East will also have a National Insurance holiday for the first year of trading.
Small business rate relief will be increased from October, giving another saving, and the extension of the Enterprise Finance Guarantee means businesses will continue to receive support when seeking finance.
Mr Bullard said: Businesses still need all the help they can get and such measures are welcome.
But he fears the crackdown on the banks through the introduction of a levy could lead them to becoming further risk averse, making it harder for small firms to arrange credit.
He added: Small firms in particular should continue to use alternative forms of finance, such as factoring, to help smooth the negative effects of the Budget and push them into the prosperous future Mr Osborne is predicting.
For further advice and information about invoice discounting contact Cashflow UK on 0800 132 156 or visit the website www.cashflowuk.com
Source - Company Press Release