European legislation is good for small businesses!
The Federation of Small Businesses (FSB) in the UK has welcomed proposals from the European Commission to allow member states discretion to reduce VAT rates on “labour intensive and locally-provided” services. This could mean VAT rates as low as 5% in some industries.
If the UK chooses to enact legislation to implement the change, the rate reduction could mean a competitive edge for small service businesses who are facing the consequences of the credit crunch as consumers cut back their spending on luxuries. Businesses that might expect to benefit include builders, cleaning and car valeting, gardeners and home help, renovation and maintenance services to places of worship and heritage sites, restaurants and caterers, hairdressing and beauty services and repairers of moveable consumer goods such as computers, bikes and clothes.
The proposals follow on a decade of experiments on the part of the European Commission to see whether reduced rates of VAT in certain sectors would have a positive impact on job creation and combating the black market. In effect the proposals would formalise these arrangements and allow members states discretion across all areas of the economy.