In this edition’s eNews, there is a warning for the Chancellor if she decides to make changes to the VAT threshold in the Autumn Budget, details of a new fraud law, the latest forecast on the UK economy, and news that the Chancellor is exploring changes to business rates for small firms. There are also details of a Budget Board to boost economic growth and a Covid repayment scheme to update you on.
- Lowering VAT threshold would be manifesto breach, warns IPSE
- Companies face prosecution risk as new fraud law comes into force
- Economic outlook remains subdued
- Chancellor to explore reforms to business rates on second premises
- Budget Board must focus on easing the cost of doing business, says IoD
- Covid repayment window opens
Lowering VAT threshold would be manifesto breach, warns IPSE
Lowering the threshold for VAT registration would breach Labour’s manifesto, IPSE, the Self-Employed Association has warned.
IPSE says that the government is in a bind both politically and economically. Having ruled out tax rises on ‘working people’ and hiking employer National Insurance contributions (NICs) the Chancellor’s options are limited.
IPSE asks, in these circumstances will Ms Reeves reform taxes rather than raising them?
Sole traders are required to register for, charge and pay VAT once their annual turnover goes over £90,000.
IPSE says this threshold can put a ceiling on the ambitions of sole traders earning close to that amount; they may be reluctant to artificially increase the price of their services by 20%, giving customers and clients a reason to buy from competitors.
Newspaper reports say that the Treasury is now considering slashing the threshold to as low as £30,000.
Fred Hicks, Senior Policy and Communications Adviser at IPSE, said:
‘This would make registering for VAT unavoidable for anyone whose main source of income is from self-employment, and then some.
‘Cutting the VAT registration threshold is not the same as increasing rates of VAT – even if it ultimately ends up with more people having to charge and pay it. And if this radical reform did go ahead, this may well be how government justifies it.
‘But make no mistake – in IPSE’s eyes, it absolutely would be a breach of their commitment – and a breach of faith – to claim that dragging people into paying a new tax is not the same as putting their taxes up.’
Internet link: IPSE website
Companies face prosecution risk as new fraud law comes into force
Companies could be prosecutedand face unlimited fines if they fail to prevent fraud that their firm profits from under a new corporate offence.
The offence will hold large organisations to account if they profit from fraud. It forms part of wider measures introduced by the government to tackle fraud and protect the UK economy.
These have been introduced as part of the Economic Crime and Corporate Transparency Act (ECCT) 2023 and came into force on 1 September.
Under the new law, which was passed with cross-Parliament support, large organisations can be held criminally liable where an employee, agent, subsidiary, or other ‘associated person’ commits a fraud intending to benefit the organisation.
In the event of prosecution, an organisation will now have to demonstrate to the court that it had reasonable fraud prevention measures in place at the time the fraud was committed.
Lucy Rigby KC MP, the Solicitor General, said:
‘Fraud undermines our British values of fairness and playing by the rules. It hurts individuals and businesses, and harms business confidence.
‘This new legislation sends a clear message that large organisations must take responsibility for preventing fraud, and those that fail to do so will be prosecuted with the full force of the law.
‘This government is committed to protecting our economy and we’re determined that those who don’t play by the rules will be brought to book.’
Internet link: GOV.UK
Economic outlook remains subdued
The overall outlook for the UK economy remains subdued despite an upgrade to its forecast, says the British Chambers of Commerce (BCC).
The UK economy is expected to grow by 1.3% in 2025, revised up from the previous forecast of 1.1%, says the BCC.
This upgrade reflects better-than-expected economic performance in Q1, supported by public spending. However, GDP is expected to slow slightly in 2026 to 1.2%, before rising to 1.5% in 2027 – unchanged from the previous forecast.
Business investment across 2025 is projected to be 1.6% – a significant downgrade from 4.8% in the last forecast, the business group added.
Vicky Pryce, Chair of the BCC Economic Advisory Council, said:
‘While 2025 may be slightly better than forecast, the overall growth landscape for the UK in the next couple of years looks weak. The economy will continue to be buffeted by global headwinds, alongside ongoing worries about high bond yields.
‘Government expenditure has bolstered the economy this year, but the spending taps are likely to be tightened very soon across Whitehall.
‘The spectre of inflation is set to loom over the economy for some time to come, with consumers reluctant to spend. That’s likely to slow the path of interest rate cuts.
‘Government long-term strategies are welcome – but firms can’t only exist on promises of tomorrow. They need help today to grow, recruit and compete.’
Internet link: BCC website
Chancellor to explore reforms to business rates on second premises
Chancellor Rachel Reeves will look at fixing the cliff edges in business rates that can discourage small business investment and growth, according to a report from HM Treasury.
Currently when a business opens a second property, they will lose access to all Small Business Rates Relief (SBRR) unless they meet specific conditions, holding businesses back from expanding.
That means that a local bakery would have to pay thousands of pounds more for opening a small shop in the next village.
The report confirms that the government will review how SBRR can support business growth, potentially lifting growth and living standards in the future for those who work in these small businesses.
This is one of the options being explored in the Treasury’s business rates interim report.
Chancellor of the Exchequer, Rachel Reeves, said:
‘Our economy isn’t broken, but it does feel stuck. That’s why growth is our number one mission. We want to see thriving high streets and small businesses investing in their future, not held back by outdated rules or strangled by red tape.
‘Tax reforms such as tackling cliff-edges in business rates and making reliefs fairer are vital to driving growth. We want to help small businesses expand to new premises and building an economy that works for, and rewards working people.’
Internet link: HM Treasury website
Budget Board must focus on easing the cost of doing business, says IoD
The government’s Budget Board must focus on easing the cost of doing business, says the Institute of Directors (IoD).
The board has been created to link top ministers and 10 Downing Street officials with the Treasury.
The board will meet weekly and will be chaired by the Prime Minister’s new economic advisor Baroness Minouche Shafik and Treasury Minister Torsten Bell.
Anna Leach, Chief Economist at the IoD, said:
‘We are glad to see the government putting renewed energy into the growth agenda with a particular focus on business.
‘It is positive that the government has announced the creation of this body, bringing together teams across Number 10 and the Treasury, focussed on ensuring that the Autumn Budget delivers vitality to the economy.
‘Business confidence has fallen to historically low levels since last year’s Budget. Our own economic confidence index fell to its lowest ever level in July this year, with taxes and the wider economic climate dominating concerns amongst business leaders.
‘To be successful, this board needs to deliver a Budget that really works for business, with swift action to remove barriers to growth from the regulatory and tax system. We look forward to engaging constructively with the board to ensure the voice of enterprise is at the heart of its work.’
Internet link: IoD website
Covid repayment window opens
The government has launched a voluntary repayment scheme to allow recipients of financial Covid support to repay outstanding money they were not entitled to or did not need with ‘no questions asked’.
The government says that over £10 billion was lost to pandemic fraud, flawed contracts and waste under the previous government’s pandemic era procurement and schemes. £1.54 billion has already been recovered through existing efforts.
It says it will do everything in its power to recoup money lost to Covid fraud.
All Covid schemes, including loans, grants, social security and tax benefits fall under the voluntary repayment scheme.
The government says that individuals who don’t take the chance to come forward and repay outstanding money could face prosecution when it receives additional investigatory powers next year.
Changes to how director disqualification works could also see more people stopped from being involved in businesses or facing compensation orders.
A Covid fraud reporting website is also being launched to allow members of the public to report suspected fraud.
Covid Counter-Fraud Commissioner Tom Hayhoe said:
‘Our message to those who still owe Covid era money is simple – pay now, clear your conscience, or face the consequences.
‘This money belongs in communities, the NHS, police and armed forces. Those who don’t take up this straightforward offer and have knowingly, wrongly claimed tax-payer-funded help could face prosecution, disqualification, or prison.
‘The digital trail is forever, so the time to settle is now – before new investigatory powers and tougher rules come into force.’
Internet link: GOV.UK
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