VAT hit for 'Business Links'

Gordon Brown has been dubbed the 'stealth Chancellor' by the Times for plans to 'secretly claw back funding promised to small businesses by tweaking the tax status of its support service'.

According to The Times, the change, by which Business Link will no longer be able to recover VAT, means that millions of pounds, which had been available to help minnow companies with tax and employment advice, will now go straight back to the Chancellor.

The move has been criticised by business groups and MPs. They demanded that Gordon Brown rethink the change or provide more funding for the support service instead to make up the shortfall. At present, Business Link receives £142 million from the Government with the rest of its budget made up from the European Union and elsewhere.

Stephen Alambritis, of the Federation of Small Businesses, said: "We would be very concerned about any fall in overall revenue which would affect the efficiency and effectiveness of Business Link’s operation."

The change in the network’s tax status stems from a shake-up in Business Link’s structure. Presently, it employs its own internal advisers to offer advice to start-ups on, for example, legal or tax issues. But from April, it will act as a 'signposting' service, directing businesses to experts outside the organisation.

Until now, Business Link, like other Government departments and agencies which supply goods or services for payment, was able to recover VAT on items it bought. But once it starts to simply refer on customers it will no longer be deemed as being 'in business' by Customs and Excise. While it will continue to be charged VAT on anything it buys from other suppliers or businesses, it will no longer be able to recover it from the Government. As a result, about 3 per cent of the network’s current annual £4 billion turnover will be lost to Customs and Excise.

Full article: 'Stealth Chancellor' cashes in on new Business Link status - The Times