- The Federation of Small Businesses (FSB) suggests revamping the VAT system to unlock economic potential.
- FSB proposes raising the turnover threshold for VAT from £85,000 to £100,000.
- This would give small firms breathing space and encourage growth without having to charge customers an extra 20%.
- FSB also recommends implementing a smoothing mechanism to ease the transition for small firms just over the threshold.
- Many small firms currently keep their turnover just below the threshold, resulting in potential economic activity being lost.
- FSB’s recommendations come after firms with a turnover between £75,001 and £100,000 expressed that the current threshold is a barrier to growth.
- FSB wants the transition from not paying VAT to being subject to the tax to be less sudden for small firms.
- FSB suggests two possible ways a smoothing mechanism could work: VAT allowance option and rebate option.
- FSB proposes discounts on net VAT for businesses with turnover up to £110,000 under the rebate option.
- FSB also calls for simplifying the rules of the VAT system.
Source: londonlovesbusiness.com
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
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