I Love Numbers I Do!


There is a mix of strategies among business for dealing with the hike in VAT that is due to take effect as from 4 January next year. A survey conducted by the Institute of Chartered Accountants in England and Wales (ICAEW) has found that businesses have a variety of planned responses.

According to the survey of those firms affected by the increase, 36 per cent will be absorbing the extra costs themselves. Another third (30 per cent) will be upping their prices to accommodate the increase, while a further third (34 per cent) will be implementing a combined approach, with some costs passed on and some costs absorbed.

Some 60 per cent firms believe that the increase will have some impact on their cashflow; almost one in ten (9 per cent) think that the effect will be significant.

The survey also revealed that the changes to VAT over the past couple of years, during which time it has dropped to 15 per cent, risen back to 17.5 per cent and now is to rise to 20 per cent, have created an extra administrative burden for firms. A third (33 per cent) described VAT as the most burdensome task, second to dealing with the payroll (50 per cent).

Business people aren't stupid and last month I attended a meeting where I was told, by a member of one of the countries largest group of importers, that the biggest companies were already planning to absorb the increase from 17.5% to 20%.

It's going to be a tough new year: the impact of job losses, VAT increase, fuel duty increases and responses to the Autumn Budget will start to take hold. On the positive front this year has seen over 300,000 new businesses start-up. Starting a business takes a lot of effort and a certain amount of guts, or stupidity, but the rewards can be seen up and down the country. In keeping with this positive mood a YouGuv survey this week shows that in the South West some 60% of survey respondents see some light at the end of the tunnel although they aren't necessary hopeful about their own particular industry sector.