VAT plan bid to boost small firms

Entrepreneur Gavin Wheeldon is hoping to persuade the Government to help small British businesses beat the recession by changing VAT regulations.

The founder and chief executive officer of translation company Applied Language Solutions, Greenfield-man Mr Wheeldon is lobbying for an increase in cash accounting allowances, arguing that the move will boost the liquidity of small businesses that are looking to survive and grow.

His move comes in light of Government plans to bailout banks with even more public money, following what he describes as the “apparent failure” of last October’s initial bailout, Mr Wheeldon, whose business is based in Delph, said: “After lobbying the Government last year to extend the Small Firms Loan Guarantee (SFLG) scheme, and being told that idea was a ‘non-starter’, the Government now plans to underwrite billions of pounds by doing exactly that.

“I can only assume that the Government is without any type of long-term strategy in place to help small businesses. How can they can guarantee the bailout will work this time around after the ‘pledges’ from the banks in October failed to materialise into lending?”

Cash accounting means that a company pays VAT only once their customers have paid for goods or services provided and is open to companies with a turnover under £1.35 million per year.

VAT accounting means that VAT must be paid on all invoices raised, whether customers have paid or not, and is required if turnover exceeds £1.65 million in the financial year.

Mr Wheeldon’s campaign proposes a simple change in VAT regulations to increase the VAT threshold to £500 million turnover — where a company is no longer classified as a small to medium enterprise (SME) — meaning that all SMEs could operate on a cash accounting basis.

It is estimated that these measures would inject up to £36 billion in short-term liquidity between all SMEs per year, even if VAT stays at 15 per cent.

He commented: “By increasing the threshold required for VAT accounting or suspending it all together means the Government can help small businesses by instantly increasing liquidity into all markets with the benefit of not needing to borrow or spend a single penny.

“It makes no sense whatsoever, especially in this economic climate, that small businesses should have to pay VAT to the Government for money they don’t even have.”

The campaign is gaining momentum, with Phil Orford, chief executive of the Forum of Private Businesses, expressing support.

He said: “The scheme provides firms with the flexibility they require during times when cash flow can be tight.

“Many ideas have been put forward to help small businesses with their cash flow, but few can deliver instantaneous improvement.”

For more information visit www.appliedlanguage.com/cash_accounting.