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THE Mirror today urges ministers to throw a lifeline to small firms by making a simple but crucial change to the way they pay VAT.

The move would boost the cashflow of around 500,000 companies, creating or safeguarding thousands of jobs. It would also cost a tiny fraction of the misguided 2.5 per cent VAT cut unveiled by the Chancellor before Christmas.

At present, firms with a turnover of more than pounds 1.35million are obliged to pay the VAT man as soon as they invoice a customer. In many cases, they are then forced to wait three months or more for their money, placing a terrible burden on their cash flow.

If, like smaller firms, companies with turnovers of upto pounds 500million were allowed to wait until they'd been paid to settle their VAT bills it would remove a huge strain on their finances at a time when it is hard and expensive for them to borrow from banks.

The idea has won backing from Gavin Wheeldon, star of Channel 4's Secret Millionaire. His firm Applied Language Solutions has contracts with Nike and is valued at about pounds 20million. The business employs 122 staff and was hiring at least five a month. But it has had to put expansion on hold, despite recently winning a pounds 4.3million contract from digger giant Caterpillar, as it can't afford to hire more workers.

Mr Wheeldon says the VAT change would free up around pounds 100,000 overnight. The idea may not seem as sexy or headlinegrabbing as previous Government initiatives, such as cutting VAT or suspending stamp duty, but these measures don't seem to be working.

These are extraordinary times and ministers need to be more inventive. The major cloud hanging over the economy is unemployment and fear of job losses.

Targeting help at small and medium-sized firms is a good place to start.


By CLINTON MANNING Business Editor
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Publication:The Mirror (London, England)
Date:Jan 16, 2009
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