Calls for VAT rise to be pushed back

17 June 2009

Businesses are unhappy over government plans to stick to its original timetable on the return to the old standard rate of VAT.

The Treasury intends that VAT will revert from 15 per cent to its old rate of 17.5 per cent at midnight on 31 December this year.

However, there are concerns among the business community that the date for the re-introduction of the old rate will make life difficult for many firms, retailers in particular.

Not only will prices will need to be readjusted during a hectic trading time, worries also exist that the changeover will adversely affect the traditionally important post-Christmas sales period, with shoppers deterred from buying larger items by the 2.5 per cent tax rise.

Richard Dodd of the British Retail Consortium (BRC), was quoted as saying: “The real impact of this is for retailers who sell big-ticket items. If you were thinking of buying a new television or recarpeting your home, you’ll realise that you will lose a significant benefit after the New Year.

“It is quite a challenge to market such items earlier, before Christmas, because most people are focused on food or presents, rather than home improvements.”

Mr Dodd continued: “We are lobbying the government to push the date to the end of January. The timing of this tax rise is terribly distracting for retailers at their busiest time. Repricing to incorporate the new tax rate is an enormous exercise, and, as we emerge from this recession, Christmas is even more important for retailers.”