& EXCISE 1
EASING THE IMPACT OF VAT ON SMEs
Government is proposing to introduce a major package of measures from
April 2001 to allow small firms to manage their entry into the VAT system,
reduce their VAT administration burden and improve their cash flow. The
package will include:
- extending the benefit
of the cash accounting scheme to 40,000 traders by expanding the turnover
limit from £350,000 to a new consolidated SME turnover level for VAT
of £600,000. This will help more small and medium sized enterprises
(SMEs) manage their VAT, whilst easing their cash flow burdens.
- allowing at least
100,000 more businesses to benefit from lower compliance costs through
the ability to file VAT returns on an annual rather than quarterly basis.
The upper turnover limit for qualification will be raised from £300,000
again to the new consolidated SME turnover level of £600,000.
- providing better
advice for SMEs, through launching a lifelong business support programme
and a national contact centre for general enquiries, extending the national
importers and exporters programme and developing e-business measures.
- increasing the
VAT threshold in line with inflation, keeping the UK threshold at the
highest level in Europe. This will ensure that another 8,000 businesses
will be entitled to operate without the need to charge VAT.
- consultation on
rationalising the frequency of VAT payments due from traders under the
annual accounting regime and introducing a lower SME turnover limit
of £100,000, under which these SMEs will be able to:
- use a "flat rate scheme". Within this scheme, SMEs
will be able to calculate their VAT liabilitiesas a percentage of
their turnover and avoid having to internally account for VAT on
all of their purchases and sales. The scheme would be designed
to generate broadly the same amount of VAT payable, but would be
simpler to use.
- enter the
annual accounting regime immediately rather than having to wait
until they have completed a year of VATable trading.
NOTES FOR EDITORS
Customs and Excise published the results of a consultation exercise into
the impact of VAT registration on small and medium sized businesses on
9 March 1999. No immediate solutions to ease the impact were proposed.
Since then, however, Customs have held discussions and workshops with
a wide range of academics, tax advisers and small business representatives,
including the Confederation of British Industry, the Federation of Small
Businesses and Manchester Business School to try to find acceptable solutions.
The package announced above is the result of this exercise.
news release and other information about HM Customs and Excise can be
found at our website: www.hmce.gov.uk
by Customs and Excise Headquarters
media enquiries please contact:
Thomson 020 7865 5471
Morgan 020 7865 5472/5872
of Hours 020 7620 1313