Who Will Suffer Most as the Impending VAT Increase Creeps Closer?

8 November 2010, 12:06

Everyone knows by now that the rate of VAT will be going up shortly after the New Year begins. But with every week that goes by there is another selection of reports that point to various potential outcomes of the rise by 2.5% that will be taking place.

Lately it has been the turn of small businesses to voice their concerns about the rises. More specifically it has been the CIPD (the Chartered Institute of Personnel and Development) that has come to the fore and pointed out that these businesses are likely to have the hardest time when faced with the increase in VAT.

Of course we will only know the full extent of the move when it finally happens and we have had some time to digest the results. But it has been suggested that the increase in prices (as a direct result of the increase in VAT) will lead to fewer people being willing to spend money. This in turn will lead to less sales being experienced by businesses. Since they will be affected by the increase in VAT with regard to filling in their VAT returns as well, it could affect them in more than one way.

It has also been speculated that many jobs could be lost as a result of the VAT rise, although once again this remains to be seen. There are many things that are causing people to be cautious at the moment, and VAT is just one of them. Even the pre-Christmas rush doesn’t seem to have taken off at the moment. The beginning of November generally sparks more purchases in the High Street because there is now only one more pay day before the big day – two if you are lucky. But so far the usual increase in sales has yet to occur.

Hopefully things will be better as we go on, but this could prove to be wishful thinking and little more. People are right to be cautious when jobs are precarious, prices are going up and the future is looking uncertain. But it could be that it will be the smaller businesses that will notice the difference and the pessimism even more than larger ones. We can but hope that the New Year will be better than we think it might be. But until it arrives, who knows what the increase in VAT will bring?