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VAT thresholds could create up to 35,000 jobs

UP TO 35,000 additional jobs could be created if the threshold at which small firms start to pay VAT was increased, said the Federation of Small Businesses (FSB) yesterday.

An FSB commissioned report by the Centre for Economics and Business Research shows that increasing the VAT threshold to £90,000, from the current rate of £70,000, could save up to £162 million per year from the reduction in red tape surrounding VAT compliance, as well as saving just over £700 million in VAT payments.

Simon Hanson, North East Policy Manager, Federation of Small Businesses, said: “The rise in VAT is one of the biggest issues for small businesses in the North East.

“The smaller the business, the higher the cost of VAT compliance; this is why the FSB is calling for the Government to increase the threshold at which a business must register for VAT.

“If the Government is truly committed to a private sector led recovery, then it must implement a Small Business Programme for Growth to allow small firms to grow and invest – and this would be a great start.”

The FSB said the additional money could then be used to create up to 35,000 jobs if on an average wage.

While this will affect the amount of money the Treasury receives in VAT receipts, they said it will be more than offset by the potential £13 billion which will come from the increase in VAT to 20 per cent - which is due to come into force on 4 January 2011.

This was posted in Bdaily's Members' News section by Ruth Mitchell .