Small Business Matters | A Blog for UK Small Businesses

VAT rate change: what was your experience?

It’s been a few days since the new VAT rate of 17.5% came into effect. As we get back to our desks and settle into our daily routine we want to know how you found the whole experience.  Hopefully it wasn’t too painful and you’re ready to hit the ground running and make 2010 count.

We’d like to hear about your experience of adjusting to the VAT change – tell us what went well and what proved to be trickier. Did you feel prepared enough and what would you have done differently looking back? What has the response been like from customers and how has it affected your business? Importantly, did you decide to pass on the cost or absorb the 2.5% yourself? Whatever you did, tell us why and how it went.

After what can be only be described as a turbulent 2009, we hope 2010 will be a bright and prosperous year for small businesses.

VAT rate change: today is the day!

It’s finally here: at midnight tonight small businesses across the UK must ensure all their prices are in line with the new VAT rate of 17.5%. Hopefully businesses have been able to plan for the change well in advance and as a result won’t find the adjustment too taxing.

However, if you’re still unsure of all the rules surrounding the change then you still have time to visit the HMRC guidance website which provides all the information you need. You can also refer back to our practical guide to handle the change, which gives some easy to follow top tips.

Don’t forget, if you’re open for business tonight then the Treasury has granted a six hours grace period. This applies to pubs, restaurants as well as retail and telecommunication businesses that will be operating beyond midnight.

Good luck and let us know how you get on – we’re keen to hear about your experiences, tell us what went well and what didn’t!

And most importantly, have a very happy New Year!

Have a very merry business this Christmas

It’s Christmas time, hip hip horay! The last minute shopping has been done (hopefully), the cash has been counted and the Christmas holidays are about to begin.

While people are at home joining in the festivities, enjoying Christmas dinner, and having a break, let’s not forget that the show must go on for small businesses.

It’s important to make sure that all is wrapped and ready for the New Year. January is expected to bring in a flurry of business as bargain hunters flock in for the January sales. To make the most of this, ensure you’re stocked up and your stores are ready to go.

As we know the VAT is to return to 17.5% on the first of January - this doesn’t leave  much time to prepare when we return in 2010, so make sure everything is in order for the change. That includes the changing of price tags, displaying notices to inform customers and making sure that payments are settled up.   

There are just three weeks to go until the VAT rate change from 15% to 17.5% takes place.

Are you planning to absorb the costs of the VAT increase rather than increase prices?

Vote now on our poll that you will find to the left of our home page.

Small businesses welcome support

Yesterday Chancellor Alistair Darling announced the pre-Budget report 2009, the results are available on the HM Treasury website. Overall the measures were positive and encouraging for small businesses. The focus was on freeing up cash and providing access to credit, which is exactly what small businesses need right now.

Below are the key outcomes that will impact small businesses.

1. The Enterprise Finance Guarantee scheme has been extended by six months to September 2010. This scheme guarantees 75% of loans to small businesses with a turnover of £25m or less, allowing start-ups to get moving while established small businesses can consider expanding and investing. So far this scheme has already supported 6,500 firms with offers of loans totalling £660m.

2. The time to pay scheme which allows small companies to spread tax payments over a longer period of time has been extended indefinitely. This scheme has been helpful for businesses trying to free up cash in the past year. 150,000 businesses have already deferred £4bn of tax in the past year as a result of the scheme and this extension now allows further small businesses to take up this opportunity and invest the available cash in new projects.

Today’s Pre-Budget report

Chancellor Alistair Darling will give his Pre-Budget Report (PBR) speech at 12:30pm today. You can follow all the latest PBR news on the HM Treasury website.

This could be Darling’s last chance to revive the struggling UK economy - it will be interesting to hear what he will propose and understand what the implications will be on UK small businesses.

We for one hope that there is some good news in store for small businesses including accessibility to much needed funding and recognition of the challenges the VAT rate change creates. Let us know your thoughts and what you hope to hear in today’s speech.

Is your business ready for Christmas?

Christmas is one of the busiest times for trading, and with just five weeks to go, the next fortnight is going to be crucial for small businesses across the country. Business owners need to ensure there is enough stock and staff on hand to manage the demand, as well as finding the time to get the all important Christmas decorations up!

Get online
As consumers become savvier and prioritise price and convenience when doing their Christmas shopping, the internet is becoming the preferred tool for browsing and purchasing. Traditionally Christmas accounts for a fifth of annual online sales and this year is set to be no exception in reaching that target. According to a new survey by eDigitalResearch and IMRG, 93% of us will be shopping online for Christmas presents this year. Despite the recession, online sales will remain strong and 71% of people are prepared to do half or more of their shopping over the internet.  With this in mind, if small businesses want to reach all their customers and maximise profits, they have little choice than to be online.

Practical advice for small businesses to handle the VAT rate change

With the end of the year fast approaching, small businesses will need to get ready for yet another admin challenge: the VAT rate change. On Friday 1st January 2010, business owners will wake up to the after effects of a 13 months 15% VAT reduction and return to the usual 17.5% rate. Despite the fact that an extension of the VAT reduction would be favourable, small businesses can still get the most out of this transition if they plan well in advance.

To quickly adjust to this change, small businesses can rely on some easy to follow top tips:

Inform your customers – Businesses should start making their customers aware of the VAT change as soon as possible to avoid disappointment or misunderstandings. It is important to clarify that the increase in prices of goods and services is due to the VAT rate change and it is not discretionary. In certain instances, it may also be appropriate to give customers practical examples of what the prices will look like from January 2010. Businesses that interact directly with the public, such as retailers, should display announcements in their shops and create bespoke banners for their websites.

Be aware:
1. Of the Price Marking Order 2004 - As January is traditionally a busy time for traders, you might not have time to adjust all your ticket prices on the 1st.  It’s worthwhile remembering that, under the Price Marking Order 2004 (SI 2004/102), you have up to 14 days to do this.  Until then, you can display general notices that advise your customers that an adjustment in price, to take account of the VAT change, will be made at the till.

Have your say - the BIS is proposing that this period should be extended from 14 to 28 days.  Responses to this consultation must be received by Monday 23 November 2009.

6 hours extra grace on VAT rate change - but still a headache for small businesses

It was reported this week that the Treasury has agreed to delay the VAT increase by six hours. This is welcome news for businesses that would have previously had to make the change at midnight on New Year’s Eve – especially the pubs, clubs and restaurants that will be open for business. The reprieve also applies to retail and telecommunication businesses that will be operating beyond midnight on 31 December 2009, and although good news, it doesn’t make the admin challenges of the adjustment for small businesses any easier!

Come January, business owners will wake up to the after effects of a 13 month 15% VAT reduction and return to the usual 17.5% rate and as such, have to face the problem of trying to sell products and services at higher prices to customers who are still hesitant to buy.

The VAT reduction came into force in December 2008 to help consumers with the recession. However, the fact is that the UK is still officially in recession and therefore, consumers are not likely to have more cash to splash in 2010 and will not like hiked up prices!

More VAT rate changes in the pipeline for SMEs?

In an announcement last week The Shadow Chancellor, George Osborne, has declined to rule out increasing the rate of VAT should the Tories be successful in the next general election.  Mr Osborne said that while he had "no specific plan" for VAT rates that he could not guarantee that they would remain the same.

But what would an increase in the rate of VAT mean for SMEs?  For many it will be an increasing burden in already strained economic conditions.