The VAT Cut Is A Joke

Thanks Alastair Darling, you’ve really helped small businesses………lose their minds.

When the VAT cut from 17.5% to 15% was put into place by the Labour government, many people saw it as a way to pass savings onto the consumer and also as an aid to the smaller businesses. As the 1st December rolled by, it became quickly apparent that the small business owner would not in any way benefit from this rate change, all it would do is serve as a massive headache.

Let me put this into perspective. The company I work for (I also have a VAT registered business of my own) are a medium sized business with 7 employees. We host courses for people wanted to become Life Coaches, all that sort of lark. We run courses all throughout the year and we take bookings on courses upto two years in advance.

When the rate change came into effect, our company was forced to reduce the amount of VAT on our courses. This was no big feat….for people who would be booking on from that day forward. The people who were already invoiced or paying instalments towards a course for an event starting in the future would need to have their course payments changed to reflect the new VAT rate. This means that even though people had paid for half the course at 17.5%, we would have to change their remaining payments. For anyone that was paying against an invoice, we will now have to “write off” the balance left from the reduction of the old price to the new.

One of my colleagues has spent at least two days changing these payments, as we have over 100 people paying on some kind of instalment plan. The cost of him doing this alone will not repay any costs recouped from the rate change.

I am dreading the fact that next year they return to normal, meaning our prices will once again rise. Is this going to help business around Christmas time in 2009? I don’t think so.