As of January 4th 2011, VAT will rise from 17.5% to 20%, bringing the UK in line with other major European nations such as France and Italy. Although businesses up and down the country will be bracing themselves for the effects to hit, what are you actually going to do to combat it? Has your business tweaked its plans and budget to help deal with the rise?
Most businesses might be wondering what this VAT increase will actually mean and what the options are. Consider the following ideas:
Let the Business Bear the Brunt
One option is to let your business shoulder the rise in VAT. By doing so, it is imperative that marketing and sales focus is increased so that the rise does not result in your business losing money. If you decide to take this option it is probably a good idea to contact a professional bookkeeper so they can go over your accounts and work out what level of sales increase is needed to cover the VAT rise.
Pass the Rise onto Customers
If it costs more to run your business as a result of increased VAT charges you may consider passing the rise onto your customers. Nobody likes to do this, especially if you have a number of loyal customers, but it may be necessary in the long run. You may be able to swallow the VAT rises for a year or two, but the pressure to do so year after year may be too much for many businesses. Management accounts are often the speciality of local bookkeepers so invest in their services to ensure all accounts are totally accurate throughout the year and that your business does not lose any profit made to tax at the end of the year.
There are contradictory claims in the business world presently as to what the best option is to take. Whatever you decide, remember to get your numbers and calculations right with the help of a bookkeeper. Do not underestimate the effect this rise could have on your business and your customers.