Tuesday November 24, 2009
Government plans to return the VAT level to its pre-Budget high will make this New Year a busy time for retailers, the Daily Telegraph has noted.
Retailers will need to re-price their stock over the festive period in order to be in a position to meet the requirement of having the new rate incorporated on products within 14 days of the change, which could prove difficult as staff levels may also be lower during the Christmas season.
However, the newspaper reports that the government is considering extending the deadline from 14 days to 28, giving retailers a much greater window of opportunity to re-price their stock.
The Federation of Small Businesses has written to the newspaper welcoming such a proposal, but has also suggested chancellor Alistair Darling should go further and delay the VAT rise until the start of February.
"This would give firms the time to get through this busy and tough period and prepare properly for the change," national chairman John Wright suggested.
The government cut VAT late last year in an effort to stimulate the economy during the recession and encourage more people to buy goods despite the downturn.
Tuesday November 24, 2009
UK value clothing retailer George at Asda has announced that it plans to hold off implementing the 17.5 per cent VAT rate when it comes into force on January 1st 2010.
Anthony Thompson, managing director of the company, said the firm will not increase its ticket prices immediately in the New Year so it can continue to provide good value for money for its customers, reports Drapers Online.
Speaking at the Drapers/WGSN Fashion Summit last week, he said: "We will go straight into the New Year with continuity in prices and there will be no sudden increases.
"We have priced products in the same way as we always do [and] will continue to do this regardless of the VAT change."
Along with its VAT announcement, George at Asda said it plans to roll out a productivity scheme in Bangladesh next year to improve the conditions and efficiency of the factories it uses for the production of its goods in the developing world.
Asda recently predicted that this Christmas period will be the most aggressive for retailers in ten years as they slash prices to compete for customers.
Monday November 23, 2009
Almost a quarter of people have made unplanned purchases just to take advantage of the lower rate of VAT before it changes, a new survey reveals.
According to a poll conducted for the BBC’s Working Lunch Programme, 23 per cent of respondents said they have spent money they would not otherwise have done so to benefit from the 15 per cent VAT rate.
Meanwhile, more than a quarter (27 per cent) said they would bring their spending forward before VAT increase on January 1st 2010.
The ComRes poll, which surveyed over 1,000 British adults, found that 32 per cent of people believe their spending will decrease after the VAT rate is lowered. Nearly three-quarters (73 per cent) of adults said they want the lower rate to be extended.
People in lower income groups were found to plan to change their spending behaviour the most in response to the rate changes.
Economic analysts recently warned that the VAT increase is expected to push inflation up by three per cent.
Wednesday November 18, 2009
Consumers in the UK are planning to cut down their spending this holiday season in the lead up to the VAT rate hike, new projections show.
The Telegraph reports that one in three shoppers expect to trim their Christmas spending this year as they prepare for higher prices when the rate of VAT is increased back up to 17.5 per cent.
Some of the areas that will be worst hit are furniture and electricals, as shoppers attempt to avoid spending money on non-essential items. However, clothing, health and beauty products will fare much better.
Overall, the non-food sector is expected to lose out on around £1.3 billion during the fourth quarter due to declining sales.
Retail market research company Verdict said the amount shoppers are set to spend during the Christmas period will fall by around £535 million this year – the first drop in 20 years.
Experts have previously predicted that there will be a surge in spending as consumers rush to secure cheaper prices before the VAT rate increases.
Monday November 16, 2009
UK retailers have given up their campaign to persuade chancellor Alistair Darling to postpone the VAT rate increase.
After the Treasury said Mr Darling is committed to increasing the VAT rate to 17.5 per cent on January 1st, the British Retail Consortium (BRC) said it will be focusing on extending the two-week price changing grace period to four weeks, reports the Times.
The BRC said retailers have now largely accepted the VAT rise and would not welcome a last minute change of decision in the chancellor’s pre-Budget report on December 9th.
However, economists have warned that increasing the VAT rate could have a negative impact on economic recovery.
Doug McWilliams, of the Centre for Business and Economic Research, told the Times: "If the VAT cut – which we think has been notably helpful in sustaining consumer spending in the UK – is reversed on January 1st, it is quite likely that economic growth will stutter in early 2010."
Irish shoppers will be taking advantage of the UK’s favourable VAT rate this Christmas shopping period after it was announced VAT in the Republic of Ireland will not be brought in line with that of Northern Ireland.
Monday November 16, 2009
The Republic of Ireland has announced that no changes will be made to its rate of VAT in order to bring it in line with Northern Ireland.
Retailers had called for lower VAT to stem the flow of shoppers travelling north of the border to secure cheaper prices, but the government maintained that VAT will remain unchanged.
Retailers have said not reducing VAT would cost the Irish exchequer 2.5 billion euros as consumers abandon local shops in favour of outlets within the UK.
Deputy prime minister Mary Coughlan was advised that Irish-branded products such as Denny traditional back rashers are 47 per cent more expensive in the Republic than in Northern Ireland, while a packet of Kerry Low Low White Cheddar Slices is 82 per cent less expensive.
According to an internal government briefing note: "It is incumbent upon all elements of the retail sector, including retailers, suppliers, distributors and manufacturers to ensure that there is the greatest degree of transparency possible as to reasons for the current north-south price differentials."
VAT is charged at a rate of 21 per cent on most goods and services in the Republic of Ireland.
Thursday November 12, 2009
UK-based department store John Lewis has announced that it plans to delay implementing the proposed VAT hike.
The high street retail chain said that although the VAT rate is expected to rise from 15 per cent to 17.5 per cent on January 1st 2010, it will not change its prices until around four weeks later, reports the Financial Times.
Andy Street, managing director of John Lewis, said the store’s promise to beat its rivals on price means that it will not raise its prices in accordance with the VAT hike until other retailers have done so.
This means that products in John Lewis’ clearance sale will still be priced at the lower rate of VAT.
Experts suggest that John Lewis’ decision to hold off implementing the VAT rate increase could potentially eat into its profits.
Last year, John Lewis was among the first retailers to pass on the 15 per cent VAT reduction to customers.
Thursday November 12, 2009
Increasing the rate of VAT higher than planned could have a damaging effect on the UK economy, the chief executive of J Sainsbury has warned.
Justin King, head of Britain’s third largest grocery chain, said any government that increases VAT to more than the planned 17.5 per cent would obstruct the chance of any recovery and penalise low earners.
Speaking to the Guardian, he conceded that it is "obvious" taxes are going to have to be raised and a rise in VAT would be quite high up on any government’s list of possibilities.
Mr King noted however, that such a move could slow the economy and turn out to be "very damaging to the poorest people in our society".
Sir Stuart Rose, chairman and chief executive of retail chain Marks & Spencer, recently predicted that the government may increase the VAT rate beyond the 17.5 per cent scheduled for January 1st 2010 in order to raise more revenues.
Wednesday November 11, 2009
Austria has announced that its former regulation providing for a taxable self supply on the cross-border leasing of cars within the EU is unlawful.
The Austrian Supreme Administrative Court ruled that the regulation providing for a self supply for services purchased in other EU member states is against community law, meaning that VAT incorrectly paid under this provision can now be reclaimed.
Officials stressed that the deadline for VAT claims is just one year from the final assessment of VAT.
After the VAT Package amendments are enacted on January 1st 2010, it will no longer be possible to obtain a deduction of VAT by leasing abroad because the cross-border leasing of passenger cars by Austrian recipients will become taxable in Austria.
According to the Society of Motor Manufacturers and Traders, new car sales in the UK increased by 32 per cent in October, as buyers rushed to take advantage of the government’s vehicle scrappage scheme ahead of the imminent VAT rise.
Tuesday November 10, 2009
One of the biggest tobacco companies in the UK is phasing out price marked packs on a number of lines to help retailers adjust to the imminent VAT change.
Imperial Tobacco announced that it will stop production on price marked packs of Richmond King Size, Richmond Superkings and John Player Special Black/White this month, reports the Grocer.
By the end of November, price marked packs of Golden Virginia Green and cigar brands Panama and King Edward Coronets will also be discontinued, with only plain packs made available.
Independent retailer Robert Mulholland said the VAT hike means retailers will have to increase the price of affected products by just over two per cent in order to maintain margins and will have to work through the night to update pricing tickets.
"Until the content of the pre-Budget Report is known, we are not in a position to assess the likely impact on our category," a spokesperson for the company told the Grocer.
Financial secretary Stephen Timms recently announced that retailers will be allowed to charge a 15 per cent VAT rate until the early hours of New Year’s Day, when the rate increases to 17.5 per cent.
