A survey carried out by VAT experts, The VAT Consultancy, has revealed that 79% of businesses saw a huge increase in business administration as a result of the VAT rate changes in 2009, while over a third (36%) said that the rate rise had actually incurred costs and driven down profit margins. 

  Just 13% of the company’s client base, which comprises a cross-section of business from large organisations to SMEs and general accountancy practitioners, saw a positive impact of the temporary rate reduction.  One respondent cited that they had recently seen a sudden rush in customers ordering to beat the rate rise which was good for business now, but they were expecting a slow-down in the new year as a result.    The majority however claimed that it had been a costly waste of time.  ‘The changes have had no beneficial effects, but have created hours of work’ claimed one respondent, while another said: ‘An increase in administration for no benefit says it all’.  

The survey undertaken last week also confirmed that 50% of respondents were expecting a further rate rise to 20% in the next twelve months.    John Crawford, Managing Director of The VAT Consultancy, who used to work for HM Revenue & Customs himself wasn’t surprised by the findings.  “We have seen a great deal of confusion, and in some cases, anger at the move this year.  The temporary VAT rate reduction was enforced to boost the flailing economy but it would appear that it has had the opposite effect.  What’s more, penalty regimes are becoming ever harsher and more strictly enforced, so the fallout for businesses getting it wrong could be catastrophic.”    To discuss how to ensure that your business doesn’t fall foul of the VAT rate changes contact John Crawford at The VAT Consultancy on 01962 735350 for a no-obligation consultation.  Alternatively, visit www.thevatconsultancy.com.