Many small businesses do not have the correct accounting systems in place to be able to deal with the end of the temporary VAT cut, the Federation of Small Businesses has warned. SMEs could be paying the wrong amount of tax and risk heavy fines because of it, The Daily Telegraph reports. VAT is set to rise from 15% to 17.5% on 1 January. 'Companies will be suffocated by further red tape as a result of the change and they will face crippling tax fines if they get their tax wrong,' said Stephen Alambritis of the FSB. Calculations by the FSB reveal that there are 2m small businesses paying VAT, out of a total of 4.7m SMEs in total, and many of these don't employ a full-time accountant.