Increase the VAT threshold to incentivise self-employed, small business growth, IPSE says

The government should increase the VAT threshold to stimulate small business growth and encourage innovation, IPSE has today said.

In its official submission to the government’s VAT call for evidence, IPSE warned against decreasing the current £85,000-threshold, as such action would actively discourage the self-employed and many small businesses from growing beyond the threshold and provide EU businesses with an economic advantage.

Instead, IPSE is calling on the government to raise the threshold in line with RPI. This would follow a trend which saw the threshold pegged to the RPI from 1980 until it was frozen in 2017

Andy Chamberlain, IPSE’s Deputy Director of Policy, commented: “Lowering the VAT threshold would be disastrous for the UK economy, particularly during the uncertainty posed by Brexit. It would be an inhibiting move that would serve only to impede business growth and drag more people into red tape. The cash-flow problems caused by such a move would mean people would face the stark choice of either raising their prices – causing them to lose customers – or absorbing the cost themselves, which would do significant damage to their businesses.

“The VAT threshold was effectively cut in the Autumn Budget in 2017 when the government stopped indexing it in line with RPI. IPSE is now calling on the government to use its call for evidence to increase the VAT threshold.

“Increasing the VAT threshold in line with RPI would provide businesses with that much needed certainty as our imminent withdrawal from the EU approaches. Presently, the self-employed contribute £271 billion to the UK economy every year – that’s enough to find the NHS, twice. Increasing the VAT threshold would create a nurturing environment for our smallest business to thrive, expand and further increase the overwhelming value they provide."