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VAT cuts 'will not help small firms'

Nov 25 2008

A reduction in value added tax (VAT) of 25 pence in the pound will not help small businesses and many may not pass it on, say some entrepreneurs.

The government confirmed a reduction in the tax from 17.5 to 15 per cent in the pre-Budget report yesterday, in a move to stimulate the retail industry.

However, a number of small to medium enterprise (SME) owners business owners say the cut will have little or no effect on their company's profits.

Stephen Peters, owner of bike shop Hampton Court Cycles, tells SmallBusiness.co.uk: 'For SMEs it's not going to be easy to change the prices in line with the reduction in VAT. For such a small amount, I just don't think it’s worth it.'

Simon Wolfson, chief executive of Next, writes in The Times that the change will be 'administratively expensive' and will 'do nothing to stimulate demand'.

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