In this week’s Enews, there is a warning for the Chancellor if she decides to make changes to the VAT threshold in the Autumn Budget. There are also details of a new fraud law and the latest forecast on the UK economy to update you on.
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 prosecuted and 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
