The Forum of Private Business (FPB) has called on an extension of payment terms next month to help SMEs get to grips with the changes in VAT.
There have been concerns raised that the change in VAT from Monday from 17.5% to 15% is going to create accounting problems for a large number of companies that have to factor in the changes to their prices.
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The FPB has argued that more help should be offered by the HMRC to explain to companies how to implement the tax cut and the legal requirement to issue invoices in 15 days should be stretched to 30, during December.
In a statement, Andrew Needham, VAT expert at FPB said that he had made contact with HMRC and there were indications some flexibility would be given to SMEs.
"Revenue & Customs was open to my suggestions and said that it would consider and make any changes within its power to assist small firms at this difficult time," he said.
Phil Jones, sales and marketing director at Brother UK, voiced the belief of many when he said that he didn’t think the cut would be passed on.
“We can’t assume that the VAT cut will be passed on because margins are under pressure from other factors such as the devaluation of sterling, which is ramping up import cost prices," he said.
"So I wouldn’t be surprised if distributors and resellers opt for a simpler approach and maintain price points during the temporary VAT cut and pocket the 2.5% to give them a little bit extra headroom,” he added.
However for retailers already facing bleak shopping figures the cut has been used as a way of trying to drive sales over this weekend with many advertising that they have incorporated the cut into prices.