More than 57,000 small businesses are facing higher bills under the flat rate VAT scheme, prompting calls for the Government to conduct an ‘immediate review’ of the tax. In its Budget submission to the Chancellor, the Federation of Small Businesses (FSB) has revealed that HM Revenue and Customs (HMRC) ‘covertly’ increased the flat rate VAT charge on 48% of business sectors.

Flat rate VAT is charged to small firms with a turnover of less than £150,000 and aims to minimise the red tape around administering VAT. It provides a slightly lower rate which varies dependent on the sector the business operates in. When the standard rate of VAT reverted to 17.5%, HMRC ‘recalculated’ the sector rates under the scheme. However, the FSB claims that this has left nearly half of enterprises paying more VAT than the pre-decrease level. Among those hardest hit by the changes are corner shops, children's clothing stores and firms providing social services.

The FSB is now urging the Government to use the 2010 Budget Report to put flat rates back to their 2008 levels. John Wright, FSB national chairman, said: ‘The FSB believes that this is a stealth tax, which will affect a firm’s overall profitability, deliberately directed at small businesses during the recession. The FSB believes there needs to be more openness in how these rates are calculated and when they rise.’

Other key requests in the group’s submission include: a complete freeze on national insurance contribution rises; an increase in the level at which businesses must register to pay VAT; and an abolishment of the 1% rise in corporation tax planned for 2011.

Martin Aitken agree with these requests. If you need advice on the Flat rate VAT scheme please call your usual contact or Richard Green in the Tax Dept.

Individuals using the New Disclosure Opportunity (NDO) have been reminded that they have just days to make their disclosures online and to pay all tax, duties, interest and penalties owed in full. Offshore investors who have notified HM Revenue and Customs (HMRC) of their intention to use the NDO have until 12 March to settle the monies owed and incur a limited penalty of 10% of their unpaid tax.

HMRC has confirmed that once the scheme closes, people who are found to have undisclosed offshore assets will be subject to a full tax investigation. Penalties will range from a minimum of 30% to up to 100%, and in the most serious cases criminal prosecution.

Dave Hartnett, HMRC’s Permanent Secretary for Tax, said: ‘Taxpayers with offshore investments who have notified us of their intention to disclose have done the right thing, saving themselves 90% of the potential penalties for failing to disclose. They now need to follow through by making their disclosure online and paying in full all the taxes they owe.’

We can help you with all your tax and financial planning needs. Please phone your usual contact here for further assistance, or ask for Richard Green in the Tax Dept.

The 2010 Budget Report will be delivered ‘in two weeks’ time’, Prime Minister Gordon Brown has announced. Speaking at Thomson Reuters in Canary Wharf, Brown confirmed that the Budget will take place on 24 March, fuelling speculation that the General Election will be held on 6 May. The Treasury later confirmed the date in a written statement to Parliament.

‘We will set out in more detail in the Budget in two weeks’ time how we deliver on our commitment to restore the public finances while protecting the fundamental public services we all depend on,’ said Brown. ‘Our approach is clear and we will not be diverted from it.’ He continued: ‘Although the economy is growing, the recovery is still in its early stages and remains very fragile. The waters are still choppy, there are still real risks to the recovery and we must be alive to them.’

On Sunday Chancellor Alistair Darling said he was ‘absolutely committed’ to reducing the UK’s budget deficit, although ruled out a full spending review.

If you wish to discuss the Budget implications with us then please phone your usual contact at MACO.