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SMEs unprepared for VAT increase

Dec 06 2010

Many SMEs have reason to fear the VAT increase

Nearly one in five small and medium-sized enterprises (SMEs) aren’t ready for the increase in VAT next month, research shows.

A survey of 1,500 businesses by Sage UK finds that while 68 per cent of SMEs are prepared for the increase, 18 per cent have yet to implement changes or are concerned about their lack of planning. VAT will increase from 17.5 per cent to 20 per cent on January 4 next year.

Suzanne Wardingham, tax specialist at Sage UK, comments that businesses should prepare sooner rather than later because many will have the added burden for the first time of filing a VAT return that includes both VAT rates next year. This is due to the rise occurring on the fourth rather than the first of the month.

Wardingham adds: ‘It’s likely that accountants will be busy with clients’ self-assessment returns towards the end of the year, so consult with them early on to understand how the change will impact day-to-day transactions. I would also suggest exploring whether there are any special dispensations for your business to help you manage the change more efficiently. Last time retailers received a two-week grace period to re-price stock on the shelves.'

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