A PETERBOROUGH-based accountancy firm is marking the 45th anniversary of the introduction of VAT in the UK with a stark warning that too many owner-managed businesses are struggling to manage VAT, a problem that is costing the economy millions of pounds in lost revenue.
The Office for National Statistics* estimates that across the UK, VAT will raise over £120 billion in 2016-17, or 16.9% of all receipts, equivalent to £4,500 per household. The estimate for 2017-18 is nearly £126 billion. VAT is the third largest source of Government revenue after income tax and national insurance.
Colin Crowley, managing partner at Rawlinsons which has offices in Lincoln Road in Peterborough and Bar Road in Lolworth and is part of the Baldwins Group, is urging owner-managed businesses to place VAT at the top of the financial agenda, and do a thorough review of how they currently manage VAT.
Mr Crowley said, “Very few businesses have the systems and expertise to manage this increasingly complex and onerous tax. The VAT system now has so many variations for products, sectors and situations, it is no wonder business owners are finding it difficult to manage. Poor VAT management can seriously limit investment, curtail expansion and restrict the ability of businesses to create employment opportunities, particularly for young people. In the worst case, failing to manage VAT efficiently can cause serious cash flow problems and threaten the viability of the business.”
Mr Crowley added, “We are encouraging owner-managed businesses to use the 45th anniversary of VAT on April 1st as the starting point to review their VAT. It could save their companies a great deal of money and be the most cost-effective investment they have made in the business for many years.”
VAT was launched in the UK on 1st April 1973, three months after the UK joined the European Union on 1st January and replaced the Purchase Tax which had been the principal tax on luxury goods since 1940.
ONS VAT forecasts: http://obr.uk/forecasts-in-depth/tax-by-tax-spend-by-spend/vat/