I think there's talk of phasing in vat in future, like vin said 1%, 2% etc
This would make far more sense than lowering it, a lot will just drop there turnover/stop operating or do more dodgy cash in hand type transactions. and the economy will suffer.
If they phase it in gradually a lot will push on and grow
At the moment it's a brick wall.
The vat threshold is there to make it fairer for the guys who don't have enough expenditure to claim any of it back, its a brick wall if you only plan to go a few grand above it, if you want to grow well past the threshold then as Lee explained its nothing to worry about.
As a proportion of turnover, a startup might well have bigger expenditures than an existing large business, so they'd have more to claim back rather than less.
The threshold was an incentive to help people to start new businesses - less admin, lower taxes and lower prices to consumers. The problem with the threshold is that if you turn over £84,999 you pay zero VAT and if you turn over £85,000 you pay £9,350 VAT (flat rate), so the market is grossly distorted and many traders sit just below the limit or do cash-in-hand work.
Flat rate VAT is simple to administrate, takes no notice of expenditures (except big bill items like new vans) and could easily be phased in as turnover grows.
As it happens, I'm not advocating it, just pointing out that the government's guessed-at policy to drop the limit to £42K will not solve the threshold's inherent problem; it'll just move it.
Vin
