The research also found that nearly 50% of firms has spent less than five hours managing the VAT increase to 20% and 29% of small business owners chose to absorb the additional 2.5% cost increase rather than pass it on to their customers.
The Managing Director of Intuit UK, Pernille Bruun-Jensen, said that “It’s reassuring to know that many small business owners have been able to cope with the recent VAT increase despite widespread predictions of doom and gloom. As this is the third VAT rate change in less than three years, those business owners who have been around for a while may feel that they have had enough practice to cope with the changes!”
The Chancellor of the Exchequer, George Osborne, announced that the VAT rate would increase by 2.5% to 20% in the Emergency Budget last year and immediately many organisations, especially those in the retail sector feared the worst. The British Retail Consortium (BRC) warned that a hike in the VAT rate to 20% would cost ‘163,000 jobs over four years and reduce consumer spending by £3.6 Billion’. In a report carried out for the BRC by the Centre for Economics and Business Research (CEBR) concluded that there is was no ‘silver bullet’ that would raise large amounts of revenue without causing significant damage to the UK Economy. At the time research found that a 20% VAT rate would:
- Reduce the deficit by £11.3 Billion in year one but would result in 30,000 fewer jobs by the end of that year
- Reduce consumer spending by:
- £1.6 Billion in year two, AND
- £3.6 Billion over four years
- Result in 163,000 less jobs after four years
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