subject: Benefits To Be Reaped By Small Businesses In Outsourcing [print this page] Small businesses have been advised they could be set to benefit the impending closure of a tax loophole, after it was revealed hundreds of millions of pounds in VAT revenue is being lost each year.
The coalition has confirmed that Low Value Consignment Relief (LVCR), which exempts low-value exports from the Channel Islands from VAT, will end next April. The measure was originally introduced in 1983, but estimates suggest it now costs the UK taxpayer around 140million annually.
These reforms will ensure that UK companies, especially small and medium-sized enterprises, can compete on a level playing field with those larger companies with the resources to set up operations in the Channel Islands, said Exchequer secretary to the Treasury David Gauke. We are also protecting a significant amount of tax revenue.
While the government of Margaret Thatcher believed LVCR would provide an overall saving by eliminating the administrative costs of imposing VAT on cheap imports, the rapid growth in online retail has resulted in a major VAT loss to the Treasury, as well as putting mainland businesses under pressure.
Jerseys minister for economic development Alan Maclean reacted with disappointment to the announcement, warning that it could lead to the loss of hundreds of jobs in the Channel Islands.
New data released by directory firm Yell has also revealed a surprising appetite among small businesses for digital growth.
The company said yesterday that it now runs 355,000 websites for its customers, up from 124,000 last year. According to Internet Retailing, the company's total number of digital customers grew by 11.1% to 940,000 during the 26 weeks to September 30, compared to the same period last year.
The firm's Chief Executive said new digital products were appealing to SMEs and had helped the company to boost income from all its digital services by 149.1% to 63.6m and its total digital revenue by 9.1% to 236m.
The results highlight the growing importance that small firms and entrepreneurs now place in having a strong digital presence and finding new businesses online.
Theres more help on the way for small businesses, after The Bank of England (BoE) Governor Mervyn King called on the government to do more to incentivise banks to provide credit to both small and medium-sized businesses (SMEs).
Speaking to parliaments Treasury Select Committee this week, Mr King insisted that it was not the central banks role to boost lending to SMEs and laid the responsibility for doing so squarely at the feet of the coalition. However, he warned that an accurate assessment of credit risk is essential.
Measures that are directed particularly on finding incentives for banks to lend specifically to SMEs ... is something which is appropriate for the government to do, and they have instruments to do it, which we don't, he explained.
Mr King suggested implementing fiscal incentives to improve the flow of credit, as well as forcing state-owned banks to loosen their purse strings. He also defended the BoEs decision to buy gilts rather than other assets as part of its 75bn quantitative easing programme.
