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Raising VAT threshold would ‘create up to 35,000 extra jobs’

 

Increasing the threshold at which small firms begin to pay Value Added Tax (VAT) could create an additional 35,000 jobs, new research suggests.

 

According to a report carried out by the Centre for Economics and Business Research, raising the threshold from £70,000 to £90,000 could save over £700 million in VAT payments and up to £162 million in red tape.

 

The think tank claims that the money saved could then be used to create up to 35,000 more jobs paying an average wage of £25,428.

 

The Federation of Small Businesses (FSB), which commissioned the report, said that an increase in the VAT threshold would provide a much-needed boost to small firms by helping to stimulate cash flow and enabling them to take on additional members of staff.

 

The organisation also warned that the forthcoming rise in VAT to 20% could hit many small enterprises who, unlike big businesses, may not be able to absorb the increase.

 

Commenting, FSB National Chairman, John Walker, said: ‘The smaller the business, the higher the cost of VAT compliance; this is why the FSB is calling for the Government to increase the threshold at which a business must register for VAT.

 

‘The potential loss to Government in VAT receipts by increasing the threshold to £90,000 would be more than outweighed by the VAT rise due to come into force in January and would help to put £900 million back into small firms with the potential to create up to 35,000 jobs.’