UK chancellor's refusal hurts UK businesses

The FPB has called on UK's chancellor to allow UK firms to enjoy the same advantages as firms elsewhere in the EU by enabling them to benefit from reduced VAT rates on labour intensive services.

The Forum of Private Business (FPB) has called on the Chancellor to allow UK firms to enjoy the same advantages as similar firms elsewhere in the EU by enabling them to benefit from reduced VAT rates on labour intensive services.

With thousands of European businesses thriving because of the reduced rates, the FPB has pushed for the take-up of a pilot scheme that would ease the taxation burden on some smaller businesses in the manufacturing of shoes, hairdressing, construction work, repair work, and renovations until 2010.

The FPB's chief executive Nick Goulding said: "It is ridiculous that UK companies are not allowed to take advantage of the reduced rate." He added that this would be another disadvantage on top of the fact that the UK's direct business taxes were now higher than most other developed countries.

The pilot scheme derogates those services from the 15% minimum VAT standard which it set until 2010 in December 2005.

Sixteen other member states of the EU are taking part in the experiment, but the Chancellor has refused to allow UK companies to take part.

Only on the Isle of Man will let renovation and repair work be subject to the lower rates.

The FPB believes this puts UK companies at a significant competitive disadvantage with regard to tax.

Ray Seymour from the National Hairdressers Federation said: "There is a high incidence of tax evasion by people who do not pay or charge VAT who are delivering home or personal services.

Reducing the VAT burden on small businesses would help them compete with the 'cowboys' and bring more money to the Treasury." The FPB has written to the Chancellor to demand that UK companies be allowed to take part in the scheme, and that he register those UK sectors to which the reduced VAT can be applied at the next meeting of EU finance ministers.

* About the Forum of Private Business - the Forum of Private Business (FPB) was formed in 1977 and is a pressure group fighting on behalf of private businesses.

The FPB represents approximately 25,000 UK-based businesses, which employ in excess of 600,000 people, and is a powerful lobbying voice in both the UK and the European Union.

The FPB, as the only full UK member of UEAPME - the organisation that represents small and medium-sized enterprises (SMEs) in Europe - is the most prominent advocate of UK SMEs in Brussels and has a track record of positively affecting legislation prior to its introduction in the UK.

The FPB also provides a range of business services aimed at increasing member efficiency and profitability.

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