Planning for the VAT increase
The standard rate of VAT will rise from 17.5% to 20% on 4 January 2011. When it comes to implementing the increase, it is hoped that most businesses will be well prepared – especially since they have already had experience of major VAT changes over the past two years.
The first was when the standard rate of VAT was cut to 15% at the start of the recession and, a year later, when the standard rate reverted to its original level of 17.5%.
Even so, surveys of SMEs throughout the UK are showing that many are worried that the VAT increase will have a detrimental effect on their business. According to the latest research by YouGov, one in five companies that are worried about the increase say they plan to freeze or reduce their employees’ pay in order to compensate for the anticipated
loss of business.
So, how can you prepare your business for the VAT rise in January?
Here are a few helpful tips to see you through the rise.
- Most people are aware of the VAT rise, why not have a pre – Christmas marketing push, or sale?
- Plan your pricing strategy carefully. Can you afford to absorb the 2.5% rise in your margins and cash flow, as you adjust to the increase?
- Plan your 4th January stock of used cars carefully. Keep VAT qualifying cars to a minimum, where possible.
- Ensure your DMS/ accounting system can cope with any unusual invoicing arrangements. For example, invoices raised and paid by customers in advance of the car being delivered.
- Make sure your accounting is correct to avoid any unnecessary fines, as heavy penalties apply if incorrect information is filed with HMRC.
- Are your staff fully briefed on the VAT rise and the implications for your business?
At Kingston Smith we offer accounting services, business consultancy, tax and audit advice and practical guidance on avoiding the pitfalls of the new VAT rise.
To find out more about this and how we can help your business flourish, contact Janice Riches on firstname.lastname@example.org or 020 7566 3804.