Tories To Defer VAT For Small Businesses

by Robin Pilgrim, LawAndTax-News.com, London

21 October 2008

Tory party leader, David Cameron, called on Sunday for the government to take on board his proposals for small and medium-sized businesses in the UK to be awarded temporary cuts in National Insurance contributions and a temporary deferment of VAT payments to help them stay afloat amid the current economic downturn.

Under Mr Cameron's proposal, SMEs would be able to defer their VAT bills for up to six months, meaning that a typical business with 50 employees, revenues of GBP5m and an annual net VAT bill of GBP350,000 wouldn't have to pay GBP90,000 to the taxman "when the bank has just taken away its overdraft."

He also called on the government to scrap the 2% rise in small business corporation tax and urged councils to reduce the amount of time it takes them to pay businesses for their services, to 20 days from the current 30 days.

Cameron's announcement was delivered in the light of Chancellor Alistair Darling's proclamation over the weekend that the Labour party is planning to boost business revenues by injecting more money into the economy over a sustained period of time. Mr Cameron has argued that this method will not be quick or efficient enough to benefit the businesses that are currently struggling against tough economic conditions.

Meanwhile, Alan Duncan, the Conservative spokesman for small business, has called for a 1% cut in the rate of employers’ National Insurance contributions for firms employing less than 5 people for at least six months. This, he said, would save a small business with 4 employees and an annual wage bill of GBP150,000 more than GBP100 a month.

Speaking of the proposals Cameron stated:

"Britain's small businesses need our help. We intervened to prevent the beating heart of our economy - the financial system - from collapsing. We've got to do the same for its lifeblood."

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