Save UK Businesses - VATs The Way To Do It

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Entrepreneur Gavin Wheeldon is hoping the Government will once again use measures outlined in his campaign to help small British businesses, by increasing Cash Accounting allowances.

I can only assume that the Government are without any type of long-term strategy in place to help small businesses. How can they can guarantee the bailout will work this time around after the 'pledges' from the banks on October failed to materialise into lending?

As founder and CEO of Sunday Times Fast Track 100 translation company Applied Language Solutions, Gavin is lobbying the Government to change VAT accounting rules, to increase liquidity of small businesses that are looking to survive and grow.

In light of this week's announcement, that the Government plan to bailout banks even further, subsequent to the apparent failure of last October's bailout, Gavin Wheeldon explains;

"Having lobbied the Government last year to extend the Small Firms Loan Guarantee (SFLG) scheme, I was told that idea was a 'non-starter', but the Government now plans to underwrite billions of pounds by doing exactly that." Following this and the announcement, he continued     "I can only assume that the Government are without any type of long-term strategy in place to help small businesses. How can they can guarantee the bailout will work this time around after the 'pledges' from the banks on October failed to materialise into lending?"

'Cash Accounting' means that a company only pays VAT once their customers have paid for goods or services provided, and is open to companies with a turnover under £1.35million per year. 'VAT Accounting' on the other hand, means that VAT must be paid on all invoices raised, whether their customers have paid their invoices yet or not, and is required if turnover exceeds £1.65million in the financial year.

The campaign proposes a simple change in VAT regulations to increase the VAT threshold to £500million turnover - the point where a company is no longer classified as 'small to medium', meaning that all SMEs could operate on a 'cash Accounting' basis. It is estimated that these measures would inject up to £36 billion in short-term liquidity between all SMEs per year, even if VAT stays at 15%.

Gavin commented: "By increasing the threshold required for VAT accounting or suspending it all together, means the Government can help small businesses by instantly increasing liquidity into all markets, with the benefit of not needing to borrow or spend a single penny. It makes no sense whatsoever, especially in this economic climate, that small businesses should have to pay VAT to the Government, for money they don't even have yet."

Gavin argues the VAT regulations are antiquated and counter-productive, adding "It's ironic that businesses will be trying to borrow money to pay VAT they haven't yet received - especially considering the Government has admitted this in its pre-budget report. Couple this with only some banks passing on the interest rate cuts and we're left with businesses still struggling with liquidity. If there's one thing small businesses cannot afford right now, it's for the Government to take its time - again."

The campaign is already gaining momentum, with Phil Orford, Chief Executive of the Forum of Private Businesses expressing his support, adding: "The Forum of Private Business supports this campaign. The scheme provides firms with the flexibility they require during times when cash flow can be tight. Many ideas have been put forward to help small businesses with their cash flow, but few can deliver instantaneous improvement. Cash accounting for VAT payments is an established mechanism that delivers immediate liquidity benefits."

Gavin's petition can be found at http://petitions.number10.gov.uk/CashAccounting/ and for more information please see http://www.appliedlanguage.com/cash_accounting.shtml

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Jodie McDermott
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