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VAT: Small Businesses

Volume 486: debated on Tuesday 13 January 2009

To ask the Chancellor of the Exchequer what assessment he has made of the effects on the cash flows of small businesses of the reductions in the flat rate of value added tax simultaneously with the reduction in the standard rate to 15 per cent. (246760)

The purpose of the flat rate scheme is to simplify VAT accounting and no direct assessment of the cash flow effect of changes to the flat rates was made.

Alongside the standard VAT rate reduction, the flat rates were recalculated to ensure they reflect both the rate change and the net VAT paid by small businesses that do not use the flat rate scheme. This avoids distortion of competition between flat rate users and small businesses that opt not to use the scheme.