VAT change costs Manchester firm £10,000 - Crain's Manchester Business

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John O’Mahony, head of tax for Tenon in the North West

1:00 am, December 11, 2008
VAT change costs Manchester firm £10,000

By Michael Fahy

Manchester-based search engine consultancy First Found is arguing that the recent cut in the rate of Value Added Tax has cost it £10,000.

The temporary cut — from 17.5 per cent to 15 per cent — was announced in the pre-budget report on 24 November and was introduced on 1 December. First Found’s owner, Chris Bellamy, said that he had to reprogram the company’s systems in order to accommodate the new rates.

“I’ve now had to create 68,000 new invoices and credit notes and email them to 6,000 different customers,” he said. “In addition, I’ve got 2,300 customers who pay me by standing order and are now paying the wrong amount, so I need to address that as a matter of urgency, too.”

Tony Reynolds, of Cassons chartered accountants and businesses advisers, looks after First Found’s financial affairs. Said he was “horrified about the costs incurred, particularly as the cut was of no benefit to it.

“First Found’s customers are predominantly VAT-registered businesses to whom VAT is a cash-flow issue only.”

John O’Mahony, head of tax for Tenon in the North West, said that many smaller firms found themselves in the same situation.

“Many of the larger retail chains appear to have passed on the rate change savings of 2.13 per cent, but smaller retailers such as restaurants, hairdressers and hot food takeaways are already struggling in the current economic climate and simply cannot afford to reduce prices, so will have retained their prices at pre-1 December levels.”

Despite this, his practice has backed the change, recognising that many businesses — including banks, insurance companies, private hospitals and schools — will find themselves paying smaller bills as a result.

Comments? mfahy@crain.com