Hundreds of jobs could be created in Moray if the threshold at which small firms start to pay VAT was increased, said the Federation of Small Businesses (FSB) this week.
A UK-wide FSB report shows that increasing the VAT threshold from £70,000 to £90,000 could put £900 million back into small firms, allowing them to improve cash-flow, expand their businesses and employ more staff.
While this would affect the amount of money the Treasury receives, it would be more than offset by the potential £13 billion which will come from the increase in VAT to 20 per cent, due to come into force on 4 January 2011.
Commenting on the impact this would have on a fragile Moray economy, Mike Duncan, Regional Organiser for the FSB, said:
"There are many small businesses in Moray who do not want to register for VAT because of the red tape. These businesses choose to operate below the VAT threshold but could easily expand their business if the threshold was increased.
"Some businesses choose to stop operating if they are getting close to the VAT threshold. They purposely stop running their business over a set period of time to keep their annual earnings below the £70,000 mark. This is a crazy situation that is stifling local economies.
Commenting on the January increase in VAT, Craig Robertson, Regional Development Officer for the Moray Business Gateway, said:
"Many small businesses in Moray could be put at serious risk by the 20 per cent VAT increase. It will affect the competitiveness of VAT registered businesses when compared to non-VAT registered businesses because the increases will have to be passed on to the customer.
"If they have not already done so, businesses may, over the next couple of months, have to prioritise their expenditure, especially if they are looking to make higher value purchases. This could have a detrimental impact on cash flow and the wider economy, and is an area of major concern".
Mike Duncan added:
"I am a business representative on the Moray task force. The task force is committed to doing what it can to sustain and develop the Moray economy in light of potential RAF withdrawal, current uncertainty and poor business confidence.
"An increase in the VAT threshold by the UK Government would help to improve the economic situation faced by many of our local small business, allowing them to invest, grow and ultimately employ more local people."
The FSB is the UK's leading business organisation with over 210,000 members. It exists to protect and promote the interests of the self-employed, and all those who run their own business. More information is available at www.fsb.org.uk
The report, 'Increasing the VAT registration threshold for small businesses', was commissioned by FSB and compiled by the Centre for Economics and Business Research (CEBR) and is available to view at www.fsb.org.uk
Find out more about the work of the task force on the Moray task force website.