The Federation of Small Businesses (FSB) has announced today (4 March) that the flat rate VAT charged to small businesses, has risen to a higher level, with rates changing depending on what sector your in.

Flat rate VAT is charged to businesses with a turnover of less than £150,000 and aims to minimise the red tape around VAT, providing a slightly lower rate. For more information on flat rate VAT, visit http://www.hmrc.gov.uk/vat/start/schemes/flat-rate.htm

The FSB’s analysis of the rates found the following increases:

· Agricultural, services sector and membership organisations – rise of 2.5%.
· Grocers, newsagents, tobacconists, social work, computer repair services and clothing shops – rise of 1.5%
· Estate agency and property management services – rise of 0.5%

Following its findings, this week, in its budget submission to the Chancellor, the FSB has urged the Government to review the issue.

John Wright, National Chairman of the FSB, said: “When VAT was lowered in December 2008 many rates stayed the same and some were reduced by up to 2.5 per cent. What has become apparent is that after VAT was put back to 17.5 per cent in January this year, nearly half of the flat rate schemes have seen the VAT level rise above the pre-decrease level.”

“While a few sectors have seen a decrease, the majority of businesses will see their rates rise, which is unacceptable at a time when cash-flow is limited. The FSB believes that this is a stealth tax, which will affect a firms overall profitability, deliberately directed at small businesses during the recession. The Budget is the Governments chance to put flat rates back to 2008-levels and remove the additional tax burden imposed on small businesses.” More information is available at www.fsb.org.uk.

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