VAT aid for small business

THE Chancellor announced a radical simplification of the VAT system in a move that could save small businesses more than £3.5bn a year.

As part of a broad attempt to counter criticism that the Government has burdened businesses with red tape and bureaucracy, Brown said small companies will now be able to pay VAT at a flat rate on sales.

The decision is expected to save firms around £1,000 a year on average. It was immediately welcomed by the Federation for Small Businesses. 'We have been calling for a simplification of the system for years. This is very good news for Britain's 3.7 million small firms,' said a spokesman.

The Chancellor also plans to extend the 10p corporation tax band to small businesses and launch a tax credit for research and development. Additionally, capital gains taxes are to be reduced in the business environment, in a move designed to encourage innovation and enterprise.

The new guidelines are part of sweeping supply side reforms which are likely to be included in an Enterprise Bill early next year.