Reduction in UK VAT rate

[kev@frames]

Has anyone noticed how the national minimum wage is increased during October, but the pay thresholds for registering your staff for PAYE don't increase until the following April. This can be a real pain if you want to employ part time staff and avoid all the hassle with PAYE, etc., as you are forced into PAYE, your part time staff get taxed and earn less, so they leave. These kind of tactics are normal practice for this govenment, it's killing small businesses and now they wonder why the country is in financial trouble.

Yeah Mark, spotted that one.

I tend to agree that this government does not like small business. It likes the self employed, they are harmless, it likes big business, but its systematic aggro towards SMEs do reflect its leftist roots. OK, so in many ways "new labour" went further right than Mrs Thatcher ever would have.

In fifteen years for us it has been progressively more complicated and less worthwhile employing staff. We used to have seven, and a turnover which once put a respectable (for an SME) contribution into the treasury pot with vat, national insurance, a small amount of corporation tax etc. They (the treasury) are getting about 1/2 as much out of us now, and we are providing work for only two part time, one full time, and the two owners.

We (my wife and I) make the same money with 4 less full time staff. Thats 4 jobs gone to the wall basically.

The sad fact of the matter is that it probably costs you twice as much to take on a member of staff as it did ten or fifteen years ago, and in real terms the staff you do take on get no better a deal thatn they did a decade ago.

With a recession coming, perhaps we'll see some knee-jerk move to help people into jobs, in which case SME's will be the people taking on new employees, but it wont be on the same terms which caused us to cease taking people on. You simply cant afford to take anyone on or cut a new employee any slack in the current regime, once you could make allowances and let people find their feet and train them, but nowadays they have to hit the ground running and be earning their keep in the business from day 1. As we all know, there isn't much an ab-initio a trainee in a framing shop can do from day one to justify even the minimum wage.

[Not your average framer]

The sad fact of the matter is that it probably costs you twice as much to take on a member of staff as it did ten or fifteen years ago, and in real terms the staff you do take on get no better a deal than they did a decade ago.

You simply cant afford to take anyone on or cut a new employee any slack in the current regime, once you could make allowances and let people find their feet and train them, but nowadays they have to hit the ground running and be earning their keep in the business from day 1. As we all know, there isn't much an ab-initio a trainee in a framing shop can do from day one to justify even the minimum wage.

Hi Kev,

Unfortunately you are pretty much correct in what you say, but the govenment also knows that your business and mine have a life of their own and the tendancy is for businesses to either grow or die. Circumstances force us to take on the staff we need to satisfy the demand created by our customers.

I'm in that situation now and I have already approached one of my existing customers to see if he is interested. With all this talk of recession, becoming an employer again, is not my preferred course of action, but since March I've been getting busier and busier. More recently I've been much busier than I can cope with and I need to do something about it.

Considering there is supposed to be a recession, I find this all very hard to explain and I must admit I don't like the fact that I've taking on staff at a time like this. I take my responsibilities to employees very seriously and would not feel good if I had to lay someone off, as I've been on the other end of that situation in the past and know what it feels like.

[Framerpicture]

[quote=Not Your Average Framer wrote:
Gordon Brown has brought this country to it's knees, sold large amounts of our gold reserves and hasn't got a clue what he is doing. He now thinks he can borrow his way out of a recession, when it's the borrowing which has already weakened the economy. We've already borrowed too much and need to stop borrowing and let this country's businesses prosper so they can regenerate the economy.[/quote]



I've been in business since 1988. Starting a couple of years before the last recession. Things were going great guns,(The Lawson Boom which was going strong but very shortly unleashed an inflationary spiral) then of course things really did go horribly wrong not just for me and my business but for every one but the richest of people.
High Inflation, High Unemployment and Intrest rates of 15%, nearly did for my business
and I only survived by the skin of my teeth after laying of the 2 staff I had.

It may well have been a coincedence, but the real growth in my business came about the same time as Tony Blair was elected. After 10 years of strong growth I now employ 6 full timers and 4 part timers. I really have never had it so good!.


I don't profess to know much about economics but to claim Gordon Brown has brought this country to its kness is slightly unfair.In the last 10 years the economy has boomed- Yes,I agree,some people have borrowed to much. I suppose most reatil businesses have taken advantage of this along with more people having more disposable income. The credit crunch has been talked about for 18 months if not longer. It was bound to happen- but then economies seem to go in cycles. America has sneezed and we, and it would appear the rest of the world, has caught a cold. I believe this situation has been bought on by greed and short term gain and regardless of who is in power, very little could be done to fend this crisis off.



I undoubtedly will have to let staff go. Fortunately I don't have expensive leases and I reckon I've got enough "fat "to see me through the next 5 years,which it will probably take to improve again.

[Merlin]

a useful reminder that has just been sent to me.

It should be automatic, but it is worth checking.

To those of you who have Standing Orders or Direct Debits with your Banks that include VAT payable after 1st December 2008, please remember to update the premium payment or at least get a credit note from the recipients to reflect the massive reduction in VAT.

[kev@frames]

^^^ good tip m8, ta!


re the growth that many of us had in our businesses since "new Labour", arguably they were simply following the economic policies of Norman Lamont, the economy was already in the first phases of recovery.
I agree that it was a time in which many of us "grew" our businesses, but the factors which allowed us to grow small businesses were (here at least) some of the following: (imho)

Premises: Lots of prime empty premises from recently closed down businesses which became available on easy terms and good rentals.

People: Lots of unemployed good quality people with skills who were only to happy for a fair days pay for a fair days work - not the generation of loafers spongers and retards we have today that thinks the world owes them a living (or that "the state" has a duty to provide them with health, wealth and happiness).

Rose Tinted Visor: We was all a lot younger then. Hardship (ie. buying clothes in scope to make ends meet because you were "building"your business") was more of an adventure than it would be if you were starting a business today. In real terms, we were not even into the "half way" point of our employment lifetime. In short we are probably a lot keener at 35 than we are at 50+

Demographic of new people in the business: In good times there are more "retirement project/second career startups" framers than in lean times. In lean time the Professionals have the playing field to themselves.

- I dont know what the average age of people who start a new framing business is, but I'd put money on it that a lot are in a "second career" with other income to support the business, so its probably between 40 and 50. Thats the reason I've seen so many local competitors "come and go", they have gone into the business half arsed as a semi retirement hobby, having done a two day course funded by their previous employer or the taxpayer, been a PITA to all of us who make a full time living out of framing with their undercutting, "hobby" pricing strategies and amateur quality work, then they've retired and p*ssed off to play golf like they ought to have done in the first place. eg there are people in this business who are your competitors and my competitors who are under the illusion that their business would make them a living when in fact it is not what their living is mostly paid from. Hence they drag the prices back down because they are unrealistic in their labour charges.

Example: we went from dining room table, to theme park, to market stall, to retail shop in one year and one month, in there years we had 2 shops and 7 staff. And we started in the red with £200 cash. No borrowings, everything paid fror from our profits which all went back into the business, no other jobs, no part time work, no subsidy or other income. And two children and dogs to feed, mortgage to pay etc.

Could any similar new startup business do that today? I'd like to think so, but I doubt it. And one bottleneck is beaurocracy and staff issues imho.

Would i do it that way again again? would i buggery.

If my shop fell down, and we moved to another town would I start another framers? Ye, like a shot. But not without fifty grand in my trousers first.

Thats the difference between now and then, i guess.

Recession can be a good time to be in business, you just have to look out for the opportunities sometimes. Judging by previous pattens, I'd give it four or five years before we "start to "boom" again. Its as sure as eggs is eggs. But i dont think this VAT cut will play any part in it.

[kev@frames]

ps. after christmas I am taking on a new member of staff too. A good move? we'll see. But its going to be last-in, first-out if it comes to any downsizing.

[Not your average framer]

Wrong am I? I used to be employed as a design consultant working in the high tech end of british manufacturing industry and was doing very nicely thank you. I was in demand and got plenty of work.

Then Tony Blair got elected, with Gordon Brown as chancellor. Gordon Brown did two things from day one, first he sold a massive amount of our gold reserves to get currency, which as everybody knows loses value over time due to inflation and also in times of crisiss. The second thing he did was to make the Bank of England independant of the govenment, giving the bank a very narrow directive of the critera of how it was to manage bank rate, etc.

Previously the economy was controlled by both interest rates and taxation in combination so as to help maintain a good climate for British industry to flourish. Now we no longer have a thriving industry, because of Gordon Brown's heavy handed clunking fist methods of running the economy. I worked for major companies with household names and international reputations and watched them being destroyed, while working as part of that industry. We were the best in the world at so many things and now we have lost most of these industries.

If Gordon Brown is so good, then where have our leading industrial companies gone. The Gordon Brown boom was paid for with borrowed money, gold reserves and the loss of a very healthy and dynamic high tech engineering sector. Virtually the whole of the industry I used to work in, was killed off, sold off or asset stripped to death since this govenment came to power. I'm not a has been, I can get work tomorrow if I go to almost any other country, but no longer in the UK.

I watched it happen from working within industry. Gordon Brown is yet to learn that if you don't make anything, your ability to create wealth for your people is drastically reduced. You can't run an economy on borrowed money for ever!

[Framerpicture]

Previously the economy was controlled by both interest rates and taxation in combination so as to help maintain a good climate for British industry to flourish.

I promise you I remember Nigel Lawson and his 15% interest rates! That certainly didn't help British Industry flourish.

Manufacturing (and jobs) will always move to where the cheap labour is at that time. With modern communications the world is now a much smaller place and this opens up lots of oppurtunities for large business to trim there costs and make more money for the shareholder.

I agree the dimise of British Manufacturing Industry is a problem but not many companies can afford to make anything in this country anymore due to much higher costs in this country. Few are being trained, in the sense of apprenticeships.

I did an apprenticeship at Westland Helicopters in Yeovil. I started with about 75 other people , about the same amout as they'd taken anually for years . It was a great training but must have cost them a lot of money. At 20, when we were skilled, a lot left to chase high wages all around the world . I stayed for a bit and at 25 started my picture framing business with £6,000 I'd saved up.

The main thing I've learnt in life about politicians is, it doesn't seem to matter who's in power you can always find someone to critisise them!

Or as Clint Eastwood so rightly said " Opinions are like a*seholes- every one's got one!

[qwerty]

Don't forget to give Gordon credit for abolition of Mortgage Interest Rate relief, University tuition fees, open door immigration policy etc.

On the plus side though you could buy a toaster (made by slaves in China)from Asda for a fiver, and he did rid the country of those who spread fear and terror by putting their wheelie bins out a day early.

His work in sharing confidential information with the wider community is also unsurpassed !

His successor has a lot to live up to but I'm sure he will rise to the occasion and surpass Gordon's achievements.

[kev@frames]

correct me if im wrong but i seem to remember MIRAS starting to be be phased out whilst the last Conservative government was still in?

re the tuition fees, hospital parking, prescription charges (etc...) note that these dont apply in scotland. Funny that.
Eh, Gordon? Alastair.....?

makes it worth all moving north of the border, however that would bugger up the barnett formula and we'd be no better off then

Not that im complaining, good on the Scots for their progressive policy on hospital parking, education charges and healthcare charges. It is a shame the rest of the UK cant do so, because its all due to the barnet formula, for which they still have not figured an equitable replacement.

But as for the dustbin naziz, and all the other big brother nonesense, all that does imho is make life more of a PITA and reduces ones quality of living.

I note now that many greenie councils are backtracking on their recycling policies because they can no longer SELLthe waste ... hmmm. So much for do-gooder intentions to save the planet ....

[qwerty]

You are wrong Kev MIRAS was reduced in Labours first Budget in July 1997 and subsequently abolished in 2000.

The provision of services in Scotland, Wales and Northern Ireland has little to do with Gordon Brown and Alistair Darling, as these regions are devolved and the Bloc allocation of expenditure for certain services is devolved to the assemblies.

The Barnett formula was introduced in 1978 and was operated by Margaret Thatchers and John Majors governments, the issue which the Mail latched on to was the fact that the formula causes higher per capita expenditure in Scotland than in England, conveniently not mentioning the fact that Northern Ireland has the Highest, and overall goverment expenditure is highest in London, with the money lavised on items such as Olympics, Crossrail, etc.

The question the english people should be asking is why their budget is not managed as well as the devolved regions.

Any 1 of thest london projects accounts for many decades of the difference in per capita expenditure.so maybe we should all move to London, like eastern europe has done.

Curious as to why the mail launched this Xenophopic campaign on an issue which was 30 years old, perhaps if GB was from NI it would have been directed at NI.

Saying that the Barnett formula is to blame for lack of services in england wales and NI is like the Mails campaign extremely simplistic.

If you think that the replacement of the Barnett formula with one that proportioned per capita spending equally among the UK would mean free prescriptions, university fees etc all over UK you could'nt be more wrong, Westminster is incapable of that sort of thinking.

[kev@frames]

hi querty

Thanks for the clarification. Mists of time and all that .... it was about the time we bought our house before last, yes 2000 now i think about it. I think we had a few months of MIRAS then it vanished completely.

I dont know what the mail says (I dont take that paper at all). If its xenophobic im not surprised though. I wouldnt like to form an opinion based on what the mail says lol.

But I was commenting on the barnet formula following seeing Jack Straw in an all party comittee meeting on parliament channel some time back, where he pointed out that although the barnet formula was far from ideal, nobody had yet come up with anything better, and that to impliment similar policies (fees, hospital parking, etc) all over the UK is not affordable, precisely because of the "per capita" balance favouring (for example) scottish citizens which does make it feasible there.

And not complaining about the formula. its better that some people benefit than none, after all. In all fairness to Jack Straw, if there is something better, what is it? Maybe after the 1595 rebellion thats just a cornishman siding with his celtic cousins up north against the english again though I dont grudge one penny of my tax going up north, after all I spent 18 years in the north sea industry seeing all their oil money pouring down here while westminster did deals with brussels and destroyed scottish agriculture and fisheries. Its payback time, they earned it and they are welcome to it imho. and good on them.

I didn't mean to imply that the barnet formula was to blame for lack of services outside of scotland, the blame for that lies in bad management imho, simple as that. Scotland = a bit more money per capita but considerably better management, england a bit less per capita and rubbish management.

Maybe we ought to have Alex Salmond in westminster as Prime Minister, and gordon up in Holyrood as their first minister - that would be interesting

The question the english people should be asking is why their budget is not managed as well as the devolved regions = because there is simply less budget per capita, perhaps? A fact of life we've got to live with. Had the english people not made their opinions so forecefully against regional devolution within england, particularly the north east, it might be a different picture.

Other regions (my own) for example receive large Objective One funding, where the EU directs what westminster spends on this region (and others) hence our new road network, and IT infrastructure in Cornwall. So its not all one-sided.

I think too much of our money in england (and probably in the regions too) is poured down the lav. I have a feeling the VAT cut is fairly pointless, and I haven't gone out to buy a new telly because its got 20 quid off.

Almost every business (SME) i speak to locally has maintained till prices in any case.

Im wondering how the VAT cut is actually going to stimulate any significant spending in the economy which will counterbalance the loss of revenue to HMRC in VAT.

They haven't actually seemed to explain in plain english how this is supposed to work.

[qwerty]

Hi Kev,

I certainly would'nt form an opinion from what Jack Straw says, at least with newspapers you do get some truth - The date at the top of the page

The mail did start this Xenophobic campaign against Scotland using these per capita figures, and totally misrepresenting the Barnett formula, which was devised to proportion changes in the spending on some services on the basis of population the formula the proportion was 85p for england. 10p for scotland for every pound of increase (or decrease) in expenditure, it does not divide up the total pot between the regions as portrayed in the Media.
The whole gist of the mails simplistic campaign was to say the english are subsidising the scots, Xenophobia sells newspapers.

As I said Northern Ireland has the greatest per capita expenditure, it's too simplistic to say that certain measures are not affordable in one region of the UK because of these per capita figures are less than others, if that was the case then london would not have a greater per capita spend than Scotland and wales(prescriptions are free in Wales also).

These per capita figures vary considerably throught the UK Northern Ireland being at the top, with London Scotland & wales , the South East and East at the bottom, generally more affluent areas further down the table, which is understandable as low income areas will require more government spending, the only exception seems to be London, wonder why?

Good to see that money is being spent in your region pity that the EU had to force the Westminster government to spend outside theM25, but I'm sure the Brits of NI Scotland & Wales don't mind their taxes going south for this.

Re. the reduction in VAT rates this was intendended to push labour up the opinion poles how can it have an effect on spending if it is clawed back in other ways.

I'm sure even Mail readers would have twigged that it's going up to 20% or more after the election!

[silvercleave]

I'm sure even Mail readers would have twigged that it's going up to 20% or more after the election!

Predicted 24 November 2008, now watch us join the euro.

[Framerpicture]

[quote="silvercleave[/quote]

now watch us join the euro.[/quote]

would that be so bad?

[kev@frames]

would joining the euro be so bad? Thats a good question. Perhaps our friends in Ireland can tell us how its gone with them.

who can tell if the euro will be any good. everyone i spoke to in holland says it put prices up, though.

We had a go at that type of thing in the recent past though: we couldn't even stay in the ERM, although some people reckon it was a very good move coming out of it.

I do sell to the eu in euros from my eu website, ( http://www.mounts.uk.com) and I cant say its been any more problem trading in euros than it has in GBP from my UK site or over the shop counter. Admittedly most of my eu online business is either to ireland or with english speaking ex-pats by the look of it, but it has risen significantly in qty as the euro gains value compared to GBP. Im doing twice online this year to what i was in euros, compared to 20 percent up in GBP (UK) sales.

Language barriers are the problem, rather than currency when it comes to eu-wide trading for an SME.

In framing for the last 15 years ive seen steady year-on-year growth, and on reflection now with three full time and two part time we are turning over as much as we used to ten years ago with 7 full time staff.

I suppose a lot of this business to do with animosity to the euro is influenced by the likes of the mail. But having worked many years for a french company and all over the euro-zone and scandinavia, I can see a certain sense to a common currency and a level-playing-field trading zone. So I guess VAT would have to rise to average european levels in that case, otherwise it wouldn't work.

VAT is a bugbear of many SMEs. For example yesteday I was chatting with a collegue who has a very very similar business (retail frame shop) and also sells online. Hes not VAT registered, I am.
Apart from the twenty grand a year i seem to collect for Gordon brown, which he does not have to, I would guess we make about the same sort of living for a framer. Comfortable enough, no real worries, nice job. Cant complain. But where is the sense in that? What idiot would choose all the extra hassle of VAT, wages, accountants, etc if it didn't show up in the trouser pocket at the end of the year?

There is not a lot of incentive to grow a business if you cant grow it from small to huge. and to do it pretty quickly. Small to a bit bigger just puts you in a VAT trap.

I estimate I got to do close to 200k to make the same personal living with VAT and staff as I would if I were working alone taking 70k and not paying VAT.
So whats the point?

Now, if ALL businesses had to be VAT registered (and why not? they do in some counrtries) everyone would be on a level playing field. Unfortunately it might make some people think twice before going into business at all in the first place, but really what loss would that be to the economy?

The 70k (or whatever it is now) VAT threshold does make it feasible for a self emplyed one man band or "mom and pop" operation to make a wage taking less than the VAT threshold. But how the hell do they break through to the 200k mark to make it worthwhile emplying staff and paying VAT?

The ridiculous thing is that if i sell my business itself, i have to charge VAT on the sale. So this traps the buyer into either taking over my VAT number or registering for VAT themselves before they have even traded a penny just to get the VAT back.
I think there could be some sort of scam to be worked there, but I'll leave that to the accountants

I suspect that i get a fair bit of "corporate" work because I am VAT registered. In fact some of my artist customers are also VAT registered (who says there's no money in being a painter lol).

The VAT threshold is rising far more slowly than retail prices. so it stands to reason more businesses will be drawn into the scope of the VATman.

When (i think it more a case of when than if) it goes up, 18, 20%, then this is not really going to encourage business startups or small business growth imho.

To grow an economy I think they need to let small business grow, some small businesses become big businesses, so the more chance a small business gets the better.

[qwerty]

Under current regulations I'dont think the UK will be in a position to adopt the euro for a long time

With the budget deficit soaring the way it is at the momment I can't see even a government as adept at distorting figures as this one managing to publish figures which show a defecit of less than 3% of GDP (although I'm sure the guys who do the immigration & crime figures are working on it right now)

With the utilities and some of the banking sector owned by european companies it will be interesting to see how this develops as the pound drops aganst the euro and their uk operations shrink in value.

[prospero]

Is it me, or is this thread really boring.

[silvercleave]

Perhaps boring but very relevant to the economic climate in the UK . . . . . and then perhaps Zimbabwe should be thought of, Because of a national cash shortage, Zimbabweans can only withdraw small amounts of money every day - often barely enough to buy a loaf of bread. The cholera outbreak has killed at least 565 people since August and more than 12,545 cases of cholera have been recorded over the same period, according to the latest statement from the UN. . . . . . puts things into perspective . . . . or am I getting soft in my old age??

[Bill Henry]

… according to the latest statement from the UN. . . . . . puts things into perspective . . . . or am I getting soft in my old age??

The difference is that Gordon Brown is an honest man trying to solve a monster problem that others created, while Robert Mguabe is a monster trying to ignore a honest problem that he himself created.