The Forum of Private Business (FPB) has called on an extension ofpayment terms next month to help SMEs get to grips with the changes in VAT.
There have been concerns raised that the change in VAT from Mondayfrom 17.5% to 15% is going to create accounting problems for a large number ofcompanies that have to factor in the changes to their prices.
The FPB has argued that more help should be offered by theHMRC to explain to companies how to implement the tax cut and the legalrequirement to issue invoices in 15 days should be stretched to 30, during December.
In a statement, Andrew Needham, VAT expert at FPB said thathe had made contact with HMRC and there were indications some flexibility wouldbe given to SMEs.
"Revenue & Customs was open to my suggestions andsaid that it would consider and make any changes within its power to assistsmall firms at this difficult time," he said.
Phil Jones, sales and marketing director at Brother UK,voiced the belief of many when he said that he didn’t think the cut would be passedon.
“We can’t assume that the VAT cut will be passed on becausemargins are under pressure from other factors such as the devaluation ofsterling, which is ramping up import cost prices," he said.
"So I wouldn’t be surprised if distributors andresellers opt for a simpler approach and maintain price points during thetemporary VAT cut and pocket the 2.5% to give them a little bit extraheadroom,” he added.
However for retailers already facing bleak shopping figures the cut has been used as a way of trying to drive sales over this weekend with many advertising that they have incorporated the cut into prices.