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VAT rise to hit vulnerable businesses hardest in 2011 ?

NEW research has highlighted that the biggest challenges facing business in 2011 is the imminent rise in VAT and the expected squeeze on the Time To Pay facility.

Insolvency trade body R3 carried out the research amongst its nationwide membership to find out about the policy and commercial issues that are facing the UK economy as it continues to recover from the recession.

Half of those questioned believe that the VAT rise is the biggest policy-related issue facing British firms over the next 12 months.

Almost a third believe that a squeeze of the Time to Pay facility would have a significant impact on companies’ capacity to continue to operate in what remains a very challenging business climate.

Linda Farish, Chairman of the North East arm of R3 and Director of Recovery & Insolvency at Newcastle-based accountants RMT, said: “The rise in VAT will make spending more expensive, serving a further blow to struggling businesses, such as retailers and restaurateurs, that rely on consumer spend.

“As a percentage, the hotel and restaurant industry suffered most during the recession and many vulnerable businesses will find themselves either shouldering the extra tax burden or suffering a further fall in consumer demand by passing the tax on.”

The Business Payment Support Service, or Time To Pay scheme, was introduced in late 2008 to allow companies to agree a delayed payment schedule for their PAYE, National Insurance and VAT obligations.

More than 11,000 North East businesses have delayed ‘crown payments’ totalling £180m in the last two years through agreements reached under the scheme.

Linda Farish added: “Our members have seen how invaluable the Time to Pay scheme has been to north east firms in the last two years.

“We believe that it is important that it remains available as a breathing space for viable businesses.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .