November 10, 2008

Gordon Brown mulls VAT slash

by Brian Turner

There are few taxes as hated by small businesses as VAT.

Sure, as a limited company we pay corporation tax – but once over the VAT threshold the biggest tax outlay can commonly feel like VAT.

So despite being small, we end up being taxed twice, with the result that our yearly tax bill can end up being around 35%.

I fully believe in being responsible for my taxes, but that can be a big hit to take is you grow just past the VAT limit.

When I first became VAT-registered, that meant suddenly having to face the option of either raising prices and losing customers because of it, or freezing prices and losing revenue to VAT.

I took the latter option, as client retention remains a core business strategy for me, and that losing out on revenues in the short-term would be off-set by keeping my business stable enough to growth further past the VAT threshold.

With that experience in mind, I’ve come to loathe VAT with a passion. It is such a business-unfriendly tax, and it serves as nothing more than a tax on service industries – which, of course, are the biggest sector in the UK.

So now that Gordon Brown announces that he may look to cut taxes piques my interest.

This is not least that the CEBR has called for VAT itself to be cut from 17.5 to 12.5%.

In conjunction with other modest tax breaks, from corporation tax which has been stealthily rising, National Insurance contributions, and business rates, such moves can only be welcome.

Doing so can only help free up cash a business can use to reinvest – develop assets further, employ new people, and ensure a stronger base in times of woe to move forward fully prepared for times of plenty.

I would love to invest more in my business, and, yes, taxes mean I have to withhold a lot of cash that could otherwise be put to other uses.

If tax cuts do come soon, that could really help spur on growth of small businesses like ours.

After all, now could be a great time to invest in internet assets, especially buying websites. After all, if the owners are feeling the pinch in terms of personal income and falling ad revenues, it’s hard to demand the same sale prices as this time last year.

And while the internet remains young, developing a strong asset base now can only pay literal dividends in the long term.

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Story link: Gordon Brown mulls VAT slash

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