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Are you ready for the VAT increase?

Are you ready for the VAT increase?

11% of businesses have still not prepared for the VAT increase which comes into force on January 4th next year, according to the results of research conducted by Sage.

In November, the software provider conducted a survey of 1,500 of its customers about the impending change. Over two thirds (68%) of the respondents said they were prepared, but 11% had not yet considered the implications of the increase.

Adapting systems to cope with a different VAT rate should not be so daunting this time around. A couple of years ago, the rate was temporarily reduced to 15% before returning to 17.5% at the beginning of this year.

The main problem, at least as far as SMEs are concerned, is whether to pass the increase on to customers. Dr Philpott from the CIPD says that smaller-sized retailers will be most affected by the change and yet the government is banking on such businesses to create employment and help drive economic growth.

However, a spokesman for the British Retail Consortium has said that online retailers are in a better position to absorb the increase than their high street counterparts, due to lower business overheads. eBay’s Online Business Index seems to confirm that view showing that 63% of online retailers are not expecting to pass the full increase onto their customers.

Contractor accountants may also find more people contacting them for help completing quarterly VAT returns. As the rate rises on the 4th of January rather than the first, some companies will need to file a return which incorporates both the 17.5% and 20% standard VAT rates.

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Image: 40+252 Shoes by bark

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