Small Businesses and Big VAT

Although David and Nick’s new coalition government produced perhaps the harshest budget in a generation on Tuesday, slashing spending, raising VAT and slapping a levy on banks to cut a record deficit to almost nothing in 5 years it may not be rosy for all concerned.

Osborne confirmed that the standard rate of Value Added Tax will rise to 20 percent from 17.5 percent from January 4, 2011.

"The measures announced in the emergency budget will go a long way to reducing the deficit and will please the 93 percent of FSB members who called for a clear plan on tackling the country's debt," said FSB National Chairman John Walker.

"The increase in VAT to 20 per cent will however, hurt small firms who will have to pass the increase on to their customers, unlike big business which can absorb the cost."

In addition the FSB gave the thumbs up to Osborne's proposals to increase the Entrepreneurs Relief threshold to five million pounds from two million pounds and to extend the Enterprise Finance Guarantee, which helps many small businesses who face difficulty in accessing credit.

All in all the ConLib government seem to be pushing in the right direction to get our economy back on track and have stuck to their word on allowing businesses to get on with business.