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Most of the businesses based in Reflex managed offices will have been affected by the temporary VAT cut, so it’s an interesting topic to consider this week. Only one week on, and so far it seems the general opinion from the business community is a big fat thumbs down to Brown’s effort to lift consumer spending. In fact, many would argue that the VAT cut is proving to be a far larger headache than a help.
Soho’s business community is no different.
The majority of small, and large, businesses are finding the admin costs far outweigh any benefits from sales increases. Instead, it’s diverting much needed man-power at one of the busiest times of the year and costing cash to re-price and re-invoice.
However, some businesses have used the cut in more creative ways. Rather than changing individual prices, they’re simply offering VAT-free promotions, to increase sales. But at the end of the day, businesses are aware that the price changes will need to be reversed once the VAT is raised again. And will any of this have made any difference to the economy? Many think not.
Of more importance than VAT cuts, is the idea currently being petitioned of relaxing VAT payment schedules to reduce pressure on cash flow. It’s being suggested that small businesses’ payment terms could be extended from 30 days after the end of the VAT quarter to 90 days. Whether Downing Street will agree to the idea is something we’ll have to wait to see. Right now, the government is offering businesses more support in that you can now call the tax authorities and ask for a more flexible timetable for paying VAT, corporation tax or National Insurance. Anything to help cash flow can only be seen as a good thing.
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