The Chancellor, Rachel Reeves, risks fuelling inflation and damaging small business growth if she reduces the VAT registration threshold in the Autumn Budget, according to leading audit, tax and business advisory firm Blick Rothenberg.
The warning comes amid growing speculation that the Treasury is considering lowering the current £90,000 VAT threshold in a bid to raise revenue and bring more small businesses into the tax system.
However, Gabby Donald, a partner at Blick Rothenberg, said that such a move would be “immediately inflationary”, forcing thousands of small firms to raise prices and burdening them with complex new compliance requirements.
“Despite advocacy from some think tanks, the Chancellor must not reduce the VAT threshold in the Autumn Budget,” Donald said. “The initial impact would be inflationary as more businesses become obliged to charge 20% VAT on top of any price increases to cover their additional compliance costs.”
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