Related Tag Articles: value added tax

How is the VAT Increase Planned for Jan 2011 Going to Affect Your New Business?

05 November 2010

"Tough luck," is basically what Chancellor George Osborne said when the new Value Added Tax (VAT) increase was announced. Come January 4, 2001, the VAT will reach 20% and undoubtedly change the way people do business, even if its only forcing people to pay more attention to their expenses.

The implications for start-up businesses might be a little harsher, however. Its important in any case to examine what this increase means to business and, more importantly, customers.

First up with the possible implications of this increase, lets take a look at how customers might behave due to the new 20% measure going into effect.

Realistically, a 20% increase means that products once costing 117.50 will now cost 120. So, its not that much of a rise when you put it in terms like that. Even still, there's always the possibility that businesses are trending their prices up by a few percentage points to cover their expenses, and that could lead to an even higher increase.

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How does VAT work within my small business when I first start up?

30 November 2008

VAT is the Value Added Tax which is added to goods and services as a means of a consumption levy on value being added to a chain. This is a tax charged at each stage between the producer and the consumer of a good or service, so in effect, the charge flows downstream.

As of December 1, 2008 the cost of the VAT will go down to 15 per cent and back up again to 17.5 per cent January 1, 2010. There are a few items that carry a lesser charge like some fuels. Other things like food, periodicals, clothes for kids and some medically based items carry no charge at all.

A business making less than £67,000 annually does not have to register for the VAT 9 digit number. This is nice for the new business on the block, making the cost of goods or services provided significantly less than a VAT registered competitor. If you do startup a business and register for your VAT number you first have to evaluate what it is you are selling and see where it falls in the VAT cost breakdown. As we discussed before some items carry a lesser charge, some no charge at all.

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