Commenting on its impact on businesses in distress, Richard Fleming, UK head of restructuring at KPMG, said: “With VAT now confirmed at 20% we could see consumer spend drop by billions. Small comfort perhaps but retailers will be breathing a sigh of relief that they have until January to implement the change. Those retailers teetering on the edge may find the VAT rise pushes them over the edge.” Indeed, the VAT increase will mean retailers will either have to increase their prices to cover the rise in VAT or accept a reduction in profit margins.

However, director general of the British Retail Consortium, Stephen Robertson commented that although the BRC is disappointed with a VAT increase, it is relieved that the range of items subject to VAT won't be expanded. He also pointed to the administrative burden: "Changing computer systems and shelf prices on tens of thousands of products is a huge, costly exercise for retailers. Planning for catalogues is a particular nightmare. The start date, in the middle of the busy and crucial post-Christmas sales period, will be difficult but retailers would rather have more notice than less.“

A surprisingly positive attitude was shown by the SME support group of the Forum of Private Business which welcomed a number of “key victories” for SMEs. The Forum believes the 1% cut in small companies’ tax, together with the new £5 million threshold for entrepreneurs’ relief on capital gains tax (CGT), are positive measures for small business. The extension to the Enterprise Finance Guarantee scheme and abolishing back-dated business rates were also welcome.

Perhaps SMEs haven’t been treated too badly in this ‘no easy options’ Budget.

Anna Ryland, Editor
aryland@datateam.co.uk