Accordance » Retail Industry VAT

Retailers contain effect of VAT hike

admin — Wed, 10 Feb 2010 10:06:14 +0000

A new report shows that many retailers have contained the effect of the recent VAT rate increase.

According to a study by the British Retail Consortium and Nielsen, January’s VAT rate increase was lost among the high number of discounts and promotions offered by retailers across the country.

The BRC-Nielsen Shop Price Index shows that non-food price inflation was 1.9 per cent – much lower than expected because many shop owners held off passing the extra costs brought on by the VAT rate increase to their customers.

Weakening consumer demand, spurred on by uncertainty about economic recovery, has stoked fierce competition between retailers, which is also playing a part in keeping shop prices down.

Mike Watkins, senior manager of retailer services at Nielsen, said: “With weaker shopper demand after Christmas and many retailers holding back or absorbing the VAT increase, it is no surprise that the shop price inflation is broadly unchanged this month.”

He added that with many seasonal promotions coming to an end, retailers will have to work harder to persuade customers to part with their cash.

Retail prices rises ‘exactly in line with VAT hike’

admin — Thu, 14 Jan 2010 10:18:31 +0000

An expert has maintained that supermarkets in Britain have raised their prices exactly in line with the VAT rate increase.

Retail industry publication The Grocer recently claimed that some supermarkets have been using the VAT hike as an excuse to push their prices up more than necessary but according to mySupermarket.co.uk, retail grocery prices are exactly in line with the VAT hike.

“We found that across all four supermarkets – Tesco, Sainsbury’s, ASDA [and] Ocado – prices were up 2.2 per cent, exactly in line with the VAT rise,” commented Jonny Steel, spokesman for mySupermarket.co.uk.

He pointed out that the vast majority of groceries such as fresh fruit and vegetables, as well as meat, fish and poultry, are exempt from VAT altogether and so have not been affected.

“In fact, fruit and vegetable prices have been stable for 12 months which is very good news for shoppers,” Mr Steel added.

According to the British Retail Consortium, overall shop price inflation was up 2.2 per cent in December.

Littlewoods reclaims £1bn in overpaid VAT

admin — Mon, 04 Jan 2010 10:12:49 +0000

UK retailer Littlewoods is seeking around £1 billion in VAT refunds from tax authority HM Revenue and Customs (HMRC), it has emerged.

The company, which is now part of Shop Direct, is claiming the amount as part of a court case in which the government is alleged to have breached European Union law more than ten years ago, the Financial Times reports.

The claim is centred on the argument that VAT refunds should be calculated using compound interest instead of simple interest.

Littlewoods’ claim alone would represent one-fifth of the £5 billion HMRC has set aside for tax refunds.

Leslie Allen, head of tax litigation at law firm DLA Piper, said there are a number of other large claims up to the value of £600 million.

"We think there are a few thousand claims in the High Court, including a large number from local authorities," he told the FT.

Last month, major bingo operator Rank launched a claim for £16 million in overpaid VAT from HMRC.

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VAT hike ‘will not prevent consumer recovery’

admin — Tue, 08 Dec 2009 10:26:02 +0000

Reversing the VAT cut is unlikely to negatively affect consumer recovery, a retail boss has said.

Laurie McIlwee, finance director of Britain’s biggest retailer Tesco, said the VAT increase to 17.5 per cent in January will not derail consumer spending but any further hikes could cause shoppers to think again before spending on the high street.

Speaking to Reuters, Mr McIlwee said any VAT increase above 17.5 per cent would knock consumer confidence just as it was beginning to rebound and put a strain on their budgets.

He pointed out that Tesco’s sales of non-food items such as electricals, clothes and toys are now growing as strongly as food and the retailer’s high-end Finest range has also returned to growth, which suggests consumers are beginning to spend again.

Speaking to the Guardian, John Lewis managing director Andy Street, recently said that a substantial VAT hike could prevent the economy from recovering from the recession and would widen Britain’s financial black hole.

Retail boss warns against higher VAT hike

admin — Mon, 07 Dec 2009 10:13:35 +0000

A VAT increase higher than the 17.5 per cent rate planned for January would have a negative impact on the British economy, an expert has warned.

Andy Street, managing director of UK department store John Lewis, said a big VAT hike could prevent the economy from recovering from the downturn and would increase Britain’s budget deficit.

Speaking to the Guardian, he warned that a potential 20 per cent VAT rate could also stifle high street spending.

"We are all reconciled to 17.5 per cent, but it shouldn’t go any further than that because the economy is very fragile," Mr Street said. "Consumption is 70 per cent of the UK economy and confidence is crucial."

A spokesperson for the British Retail Consortium added that a significant increase in the VAT rate would also increase inflation.

There is widespread concern within the retail industry that chancellor Alistair Darling will introduce a higher VAT rate in this week’s pre-Budget report.

Retailers’ association warns of VAT on healthy foods

admin — Tue, 01 Dec 2009 10:51:16 +0000

A UK fruit retailers’ campaign group has warned that the government may be on the verge of introducing VAT on a wider range of healthy foods.

The National Dried Fruit Association (NDFA) said the introduction of tax on 100 per cent fruit snacks could signal the beginning of a new drive to charge VAT on healthy foods that were previously exempt, reports the Grocer.

Last year, the government changed its guidance to charge VAT on 100 per cent unsweetened fruit bars and sweetened dried fruit sold as snacks.

Phil Whitfield, spokesman for the NDFA, called the guidance "disgusting" and maintained that it "sets the scene for charging VAT on other foods".

Mr Whitfield said the amendments were not widely publicised and manufacturers only became aware of them following visits from tax authority HM Revenue & Customs.

The Confederation of British Industry recently revealed that 40 per cent of retailers have reported an increase in sales volume over the past year.

Pre-VAT hike sales on the rise

admin — Tue, 01 Dec 2009 10:26:49 +0000

High street retail sales rose at the fastest pace in two years in November as shoppers rushed to beat the VAT rate increase.

According to the Confederation of British Industry (CBI), sales are expected to increase even further in the run-up to Christmas, helped by moderate inflation and low mortgage interest payments.

Grocers, leather and footwear retailers reported strong growth in November while furniture, carpet and durable household goods retailers also experienced a rise in sales volumes.

Andy Clarke, chairman of the CBI distributive trades panel and chief operating officer of Asda, said: "It’s reassuring that the high street now has a second month of sales growth behind it and it looks like December will be even better."

He pointed out however, that despite the more positive mood among retailers and the pre-Christmas sales growth, consumers are still worried about job losses and a weak economy.

"In 2010 the high street will find that recovery is fragile and slow," Mr Clarke added.

Analysts have predicted that sales of more expensive goods such as fridges and televisions are set to grow in the lead up to the VAT hike as consumers look to secure cheaper prices before January.

Cross-border VAT shopping threatens Irish jobs

admin — Mon, 30 Nov 2009 11:45:01 +0000

The dash to purchase items at lower VAT rates in Northern Ireland is costing scores of jobs in the Irish republic, retailers have said.

According to Retail Ireland, the migration of consumers north of the border for shopping trips resulted in the loss of 1,700 jobs in November at an average of one job loss for every 150 cross-border shopping trips.

Retail Ireland based its figures on a survey conducted by TNS Worldpanel, which estimates that 3.5 per cent of the republic’s grocery retail market has made a trip north to secure bargain prices.

Torlach Denihan, director of Retail Ireland, said cross-border shopping caused approximately 400 job losses over this past weekend alone.

"If cross-border shopping continues at this rate during December, similar numbers of jobs will be lost, with particular devastation in border counties Cavan, Donegal, Louth and Monaghan," he said.

A recent report by the Office of the Revenue Commissioners and the Central Statistics Office found that the total value of cross-border shopping in 2009 will be between 450 and 700 million euros.

‘VAT reduction had small impact on sales’

admin — Mon, 30 Nov 2009 11:17:27 +0000

The VAT rate reduction to 15 per cent last year has only made a small difference to improving retail sales, an expert has said.

Richard Dodd, of the British Retail Consortium, explained that the effect of the VAT cut on retail sales has been marginal when set against some of the big discounts retailers have been offering under their own volition.

He pointed out therefore, that the fact VAT is going back up to 17.5 per cent in January will only make a small difference to sales and will only significantly affect those buying larger items such as cars and expensive furniture.

"The most important factor influencing sales is the state of the economy and how confident and well-off people feel," Mr Dodd said.

"I actually think the impending VAT increase is not much of a factor at all in the improving sales that we are seeing."

According to the Confederation of British Industry’s latest Distributive Trades Survey, 19 per cent of retailers expect sales volumes to improve next month when compared to last December.

Campaign launched to reduce beer duty

admin — Thu, 26 Nov 2009 11:14:02 +0000

Pub owners are calling for the government to reduce duty on alcohol to stop British pubs from closing.

The British Beer and Pub Association (BBPA) and the Society of Independent Brewers have launched a campaign called "I’m backing the pub", which is designed to persuade the government to cut the tax on beer.

Publicans want the eight per cent increase in duty on beer, which was imposed at the time of the VAT cut last January, to be reversed when the VAT rate returns to 17.5 per cent on January 1st 2010.

They also want plans to increase duty by two per cent above inflation in the next budget to be scrapped.

Brigid Simmonds, chief executive of the BBPA, said: "It is time for a concerted effort by government, industry and all those who value the pub to work together to adopt and implement policies to promote the great British pub."

There have been 3,500 pub closures since the March 2008 Budget and 112,000 jobs lost since 2004.