Pre-Budget statement: VAT changes for small business
Gordon Brown has announced the government will review the VAT system for small businesses, with the aim of simplifying it, as part of a range of tax measures aimed at helping the sector.
In his pre-Budget statement, he said the VAT revamp would help around half a million businesses.
As widely anticipated, the cash accounting scheme will benefit up to 40,000 traders by extending the turnover limit from £350,000 to a new level of £600,000.
The change will mean that traders will not have to pay VAT until customers pay them.
In addition 100,000 more businesses are set to benefit from annual rather than quarterly filing of VAT returns by raising the turnover limit from £300,000 to £600,000.
The VAT threshold limit will be raised annually in line with inflation.There will also be consultation on rationalising the frequency of VAT payments due from traders under the annual accounting regime and the introduction of a flat rate scheme where VAT liabilities can be calculated as a percentage of turnover.
Keith Anderson at KPMG welcomed the changes saying: ‘While these changes were expected, the reduction in the amount of regulation will be welcome for small businesses.’