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New Year to bring welcome changes for some contractors

Limited company contractors are set to see VAT rules easing in the New Year, thanks to new EU regulations.

There are several new legislative changes going forward from 1 January of next year that have been instituted to make contractors’ lives easier and allow them to save money. In fact more than £14 billion could stand to be saved by by businesses every year by the new measures, which aim to reduce administration costs, says the European Commission.

One of the changes will be to the way invoices are handled, with paper and electronic invoicing to be considered one and the same. This means that firms may choose the solution that is the easiest and saves them the most money when it comes to VAT invoicing.

Additionally, all EU member states – which includes the UK – will be permitted to offer small businesses with turnover of around £1.6 million a year (€2 million) a cash accounting option. This will leave these smaller businesses with the option of not paying the VAT until customer receipt, which should reduce the potential of problems with cash flow.

Taxations, customs, anti-fraud and audit commissioner, Algirdas Semeta, commented on the new changes, remarking that firms operating within the eurozone need such changes in order to have their needs met in a better way. These changes to VAT will make procedures simpler, costs less, and increase support for solutions that help EU member country business – especially small business – to grow, added the commissioner.

Hopes remain high that these reduced and streamlined VAT requirements will enable these smaller businesses to grow and help contribute to the economic recovery in greater numbers. In the UK alone smaller businesses are often referred to as the backbone of the economy, and contract workers especially so due to their flexibility and high value for money.

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