A chartered accountancy body has urged the government to consult on a path to a single VAT rate to simplify and restore business confidence following the Autumn Budget.
The Institute of Chartered Accountants in England and Wales (ICAEW), which represents over 140,000 UK members, reported negative overall sentiment toward the recent Budget.
According to exclusive data shared with City AM, over 70 per cent of respondents believe the Budget will negatively impact their business, with 22 per cent of those in accountancy practices expecting a “very negative” effect.
As a result of the decisions Chancellor Rachel Reeves made, ICAEW members believe price increases are now expected. Over a third of those surveyed expect to increase prices, rising to nearly half for those working at an accountancy practice.
Nearly 40 per cent anticipated a reduction in headcount, and additionally, 30 per cent said that there would be a reduction in investment.
The body warned back in October that more than half of businesses would cut staff or stop hiring if Reeves hiked taxes.
Iain Wright, chief policy and communications officer, ICAEW, stated: “For a government whose number one ambition is economic growth, and a Chancellor who certainly had the opportunity to go for growth, this was not the Budget to deliver a much-needed confidence boost to UK plc.”
On Monday, a report revealed that business confidence had dropped to post-pandemic lows.
Government called on for reforms
Members of ICAEW have urged the government to restore business confidence and unlock growth, with a list of recommendations including reforming the VAT system.
The body calls the VAT system complex, as its rules create costly disputes, and the threshold cliff edges act as a hidden tax on innovation and growth.
The advisors also told the government not to apply business tax increases in this Parliament, to give businesses the confidence to invest, hire and take risks.
“Our members consistently tell us doing business is too expensive, too difficult and too uncertain. Unless the Government signals a clear change of course, it will struggle to deliver the conditions for growth the UK needs,” Wright added.