The VAT impact Not as detrimental as first feared
The VAT impact Not as detrimental as first feared.
On January 4th of this year the standard rate of VAT was increased from 17.5% to 20%. Touch Local carried out a poll amongst a sample of UK SMEs registered on our directory to find out the effect the VAT increase has had on their business one month on.
In the month since the VAT rate increased to 20%, has it had a detrimental effect on your business?
The Results Yes: 347 (33%)
No: 547 (54%)
Dont Know: 135 (13%)
*Total responses: 1029
The businesses who took the survey are all listed on http://touchlocal.com
Over half of small business respondents (54%) who took the survey do not believe the rise in VAT has had a detrimental effect on their business. On the whole, they have not noticed a significant change in output or profit, with a few finding that business has in fact increased in the first month of this year.
A third of respondents (33%) believe that their business has been negatively affected by the increase, with many commenting that they have been forced to increase their prices, which has resulted in customers looking for cheaper alternatives. Other business owners have attempted to absorb the rise to avoid passing the costs on to their customers, but are finding they are forced to make cutbacks to make the move financially viable.
A minority of respondents (13%) believe it is too early to comment on the impact the VAT rise has had on their business.
See below a selection of comments received from respondents:
I have always tried to keep my prices as low as possible, but the vat increase has made me higher
The rise in VAT is mainly affecting our fuel costs. The private consumer will also look at our charges and may well go to a competitor who is not VAT registered
Mine is a service business trading with vat registered businesses. January 2011 proved to be the best month ever!
As we cannot claim back out VAT, it means that all our costs are 2.5% more and so our profits are 2.5% less - crippling.
Since the VAT rise I have had to put my prices up. Not a lot, but with the current economy it is showing a bit. Customers want to pay less but everything is going up. Therefore business is slowing or I have to work for less.
It's a bit too early to tell. But as we have swallowed the increase ourselves, then in the long term it will impact on our profits.
I just deregistered for VAT because of the increase
Most clients are VAT registered so cost is passed on
We deal a lot with customers that work in prices before VAT and calculate to those prices. It is a little different to retail but our business seems to be running at a similar rate to last year.
Best January for quite some time in terms of revenue.
We have tried to minimise the impact of a further 2.5% rise in prices, but someone has to pay, so our customers either loose out or we reduce our small profits even further
The VAT increase helped our December sales as customers got in before the increase. Sales for January were up 28% on last year