BRC: Implementing new VAT rate is ‘mammoth task’ for retailers

| November 25, 2008
”BRC:

In yesterday’s Pre-Budget Report, Chancellor Alistair Darling, announced that VAT is to be cut from 17.5% to 15% from next Monday, December 1, for 13 months

While the cut has been welcomed by many, Stephen Robertson, director general of the British Retail Consortium (BRC), said implementing a new VAT rate in just one week will be exceptionally difficult for customers and retailers at their busiest time of year.

IT system changes and replacing shelf labels will be a mammoth and expensive task. Small retailers will find all this particularly difficult to accommodate, added Mr Robertson.

However, the Chancellor is urging retailers to pass on the new rate as soon as possible.

Meanwhile, John Lewis has said it is to lower prices this week. Furthermore, Home Retail Group, which owns both Argos and the DIY chain Homebase, said it planned to pass on the full VAT cut to customers as soon as possible.

However, changes of this kind will not be so easy for small and medium sized businesses, said the Federation of Small Businesses.

The new rate has been welcomed by the car industry and prices in showrooms will start to fall from Monday.

Sue Robinson, director of the Retail Motor Industry Federation, said that the reduction in VAT will result in lower car prices which will hopefully encourage customers back to the showrooms.

Finally, Deloitte indirect tax partner, Daniel Lyons, said many food items do not attract VAT so the new rate may be too small to have an affect on larger purchases. For example, a £550 flat screen TV would be reduced to £538.38, while a typical supermarket shopping basket would fall only 53p to £49.47.

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