And here’s ANOTHER stealth tax for small businesses... a VAT hike

THE Chancellor was last night accused of punishing the self-employed with another stealth tax rise set to cost businesses £700million.

Thousands face a steep increase in VAT from next month, which will generate £195million for the Treasury this year and £695million over five years.

Some of the smallest convenience stores and newsagents will see their VAT rate more than quadruple from 4 per cent to 16.5 per cent. But experts say self-employed hairdressers and secretaries who provide a service and have low overheads are most likely to be hit.

The VAT increase was announced by Mr Hammond in the Autumn Statement in November and billed as an attempt to stop the abuse of a scheme under which some small firms can pay a reduced rate of VAT to HM Revenue and Customs.

It followed reports that employment agencies were dividing themselves up into tiny companies to qualify for a lower VAT rate. This led to a surge of 30,000 applications for the reduced rate scheme last year.

But the Forum of Private Business said the move would also lead to higher taxes for many small firms which have done nothing wrong and already face higher business rates and wage bills and rising insurance premiums.

Ian Cass, managing director of the lobby group which represents 12,000 small firms, said: ‘This is starting to feel like a real attack on the self-employed. The very people we are relying on to get people trading after Brexit are the very people being battered.

‘The Government is in danger of killing the entrepreneurial spirit in this country.’

A Treasury spokesman said: ‘Our reforms will stop a growing number of people using the scheme to get a tax break, while still allowing businesses to benefit from the simpler VAT process.’