Love it or hate it, Alistair Darling’s notorious VAT cut has provoked a global response from businesses of all sizes. This measure that was designed to boost economic activity was initially described as a nightmare for small businesses, and has recently been hailed as a success by the CEBR. The group reports that the temporary cut has resulted in a £2.1 billion increase in retail turnover.
However, in a recent Intuit survey, 56% of small business owners stated that none of the measures in the Pre-Budget Report had benefitted them. In the long term there may be benefits to the VAT reduction, however, in the short term it has been painful for businesses to implement the changes. For this reason, the small business budget wish list included an extension of the VAT reduction, and the chancellor must carefully consider this if small businesses are to gain the long term benefits of their short term hardship.
On top of that, many small businesses and retailers are petitioning to the government to delay the VAT change (currently set for 31st December), as restoring the original rate at their busiest time of year could have a devastating effect on their businesses.
Regardless of whether Darling announces an extension on the 22nd or not, it is fair to say that calling the VAT reduction a success does not take into account the huge expense and effort that small business owners have had to undergo.
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