Hammond faces VAT raid backlash

PHILIP Hammond was facing a backlash last night over plans for a £2billion Budget tax raid on small business.

The Chancellor is examining controversial proposals to drag hundreds of thousands of firms into the VAT system as he looks for ways to balance the books this month.

Similar plans were abandoned in the runup to last year’s Budget following warnings they would be politically toxic.

But Treasury sources have confirmed the idea is back as part of the drive to pay for a £20billion funding boost for the NHS promised by Theresa May.

Sources said all options were now ‘on the table’. Yesterday, the Mail revealed this could even include tearing up the manifesto pledge to raise income tax thresholds. Mr Hammond has also considered a raid on middle class pensions.

At present, traders only have to charge VAT if their turnover tops £85,000 a year. Halving the threshold to £43,000 – the level said to be favoured by the Chancellor – would affect half a million small firms and raise up to £1.5billion. Cutting the rate to £25,000 could yield up to £2billion

Mike Cherry, chairman of the Federation of Small Businesses, warned Mr Hammond against a ‘blatant tax grab’.

He said: ‘A blanket lowering of the VAT turnover threshold would represent a blatant tax grab. Certainly not the action of a pro-business government.’

Tory MP Anne-Marie Trevelyan added: ‘Instead of raising the threshold so that these small businesses can take on another member of staff, training up the next generation, without having to add 20 per cent to the customer’s bill, this latest Treasury bottom-drawer proposal would risk reducing the growth of these small businesses.’