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Possible VAT Rate changing

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Alison Jones

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Mar 14, 2008
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Not sure if I misheard on the radio (only half listening) that there may be a chance the VAT rate will change next week to 12%. Does anyone know more about this?

Thanks

Alison
 
Hi Alison
Heard a similar thing, it seems as if there is a thought that Alisatair Darling may announce a change to VAT in his Pre Budget Report. But it is all rumour at the moment because there is also a possibilty of other tax cuts in the PBR.

Mark
 
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I really hope it does not happen, it will create mayhem for bookkeepers and accountants. All bookkeeping software whether it be Sage, Quickbooks, MS Accounting or any others all calculate VAT @ 17.5%, if it does change though hopefully sage, Microsoft and the like will send update disks to change it.

Alison
 
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good lord - I really don't believe that guy!

I am all for tax cuts but could it possible pick on one which is easy to implement!

IMO changing the vat rate means a lot of work e.g. repricing of items being sold where vat is included (e.g. a lot of things on supermarket shelves), changes to flat rate plus other special schemes, cut over issues.

Am I missing something here?

Why can't he just change the basic rate of tax.
 
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Hi Elaine
I don't think that you are missing anything, though certain members of our government may be (in my opinion). Yes, I agree why can't they lower the income tax and let us decide where to spend our money.
Mark
 
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Marky65 said:
Hi Elaine
I don't think that you are missing anything, though certain members of our government may be (in my opinion). Yes, I agree why can't they lower the income tax and let us decide where to spend our money.
Mark
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Thanks - I did think I was beginning to lose the plot which is quite possible as others on here seem to agree with :p:D
 
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Hopefully someone in the government may use some common sense in time and not change the VAT.

It will cause too much hassle for businesses, bookkeepers and accountants.

If they going to change anything they should just increase everyones personal allowance again as that is easy to change on payroll software.

Alison
 
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Since when did the Govt ever think of the consequences of any of their "back of a fag packet" vote winning ideas?

I can't really think they'd give any thought at all to the practicalities of a change in the VAT rate.

I don't really think that they will reduce VAT though. I thought that they needed prior approval from Brussels to reduce a VAT rate?

I remember when VAT went up before. My parents had a corner shop and we literally spent all night repricing everything as I seem to remember it was an increase in rate from midnight on a specific day. We had loads of trouble as many things (like chocolate bars) had their prices printed on the wrappers and we had to over-write them - customers thought we were profiteering but we had to account for the new rate on all sales the next day!

These days things are different but it would be hard work in other ways. Think about vending machines etc needing to be repriced, internet e-commerce retail sites, computerised tills with bar code readers, parking ticket machines, automated billing systems, etc. With more use of technology, it won't be as "easy" as sticking a new price on a chocolate bar. IT bods will be needed to write scripts for repricing an entire database or to reprogam machines etc. Realistically, I'd say we'd need at least 3 months notice to give time for everyone to get their systems changed - compare that with the 12 hours notice we'd probably get!
 
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Alison Jones said:
I really hope it does not happen, it will create mayhem for bookkeepers and accountants. All bookkeeping software whether it be Sage, Quickbooks, MS Accounting or any others all calculate VAT @ 17.5%, if it does change though hopefully sage, Microsoft and the like will send update disks to change it.

Alison
Click to expand...

Ahh, the beauty of web-based software. Wouldn't cause any problems at all for KashFlow customers. And if it did, we can fix it instantly for everyone at the same time.

I wonder what the intention of the possible cut is. If it's to put more money in the consumers pocket - it wont happen. Prices will stay the same but the last man in the VAT chain will make more profit.
 
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DuaneJackson said:
I wonder what the intention of the possible cut is. If it's to put more money in the consumers pocket - it wont happen. Prices will stay the same but the last man in the VAT chain will make more profit.
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Exactly. I can't see a £1 Coke bottle vending machine suddenly reducing in price to 95p, or a 1 hour parking ticket changing from 60p to 57p. In fact, the only things I could see changing would be the costs of services where things are typically quoted net with VAT added on top, like plumbers, etc. Anything retail where the price includes VAT is highly unlikely to fall in price unless the VAT is reduced more considerably, or zeroised. 3p off 60p or 5p of £1 simply isn't enough to make the supplier change the price.
 
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Surely the aim is to keep businesses afloat (keeping jobs from going to the wall), since they can't get cash from banks. If so, cutting Corporation Tax isn't going to help those businesses that need help, since they'll have no profits anyway! It has to be VAT.

Looking at the wider picture, it can be a double benefit - either retailers reduce prices to the public and the public benefits; or the retailer can keep prices unchanged and boost both profits and cashflow.

Of course, what this won't do is help businesses that sell to other VAT registered businesses, since it will not matter how much VAT is charged on such sales.

But I'm not sure the administrative costs of adjusting the accounts is a reason not to do this. Many countries around the globe have been discussing this for a few weeks now. They seem to be thinking that there is a real boost for many businesses and jobs could be saved. Hopefully it will not require too difficult a (manual) adjustment to VAT records.
 
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Kevin Hall said:
Of course, what this won't do is help businesses that sell to other VAT registered businesses, since it will not matter how much VAT is charged on such sales.
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That was going to be my point. But it does seems, from people I've spoken to as opposed to whats in the media, that retail is the big sufferer at the moment. So it makes sense.

I really don't see the administrative side of things being a big burden.
 
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DuaneJackson said:
That was going to be my point. But it does seems, from people I've spoken to as opposed to whats in the media, that retail is the big sufferer at the moment. So it makes sense.

I really don't see the administrative side of things being a big burden.
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I agree with Duanne. I don't see the admin. behind it being a big headache. Should generate some fees for us bean-counters though. :D
 
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I hope they have the foresight to change the FRS rates at the same time - otherwise those clients on 13.5% might be feeling that the scheme is suddenly a bit of a disappointment!
 
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Jaydee said:
I hope they have the foresight to change the FRS rates at the same time - otherwise those clients on 13.5% might be feeling that the scheme is suddenly a bit of a disappointment!
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Would it make a difference?

Under the current rate £100 + VAT = £117.50. FRS at 13.5% pays £15.86

Under the new rate £100 + VAT = £112.00. FRS at 13.5% pays £15.20
 
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dp0848 said:
Would it make a difference?

Under the current rate £100 + VAT = £117.50. FRS at 13.5% pays £15.86

Under the new rate £100 + VAT = £112.00. FRS at 13.5% pays £15.20
Click to expand...

It certainly would - your £15.20 is greater than the £12 you have billed whereas your £15.86 is not.
 
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dp0848 said:
Would it make a difference?

Under the current rate £100 + VAT = £117.50. FRS at 13.5% pays £15.86

Under the new rate £100 + VAT = £112.00. FRS at 13.5% pays £15.20
Click to expand...

Yes, at 17.5% the business gets to keep £101.64 but at 12%, the business gets to keep £96.80 - a "loss" of £4.84 which is quite a lot!
 
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I really hope they don't go through with this. A lot of my clients have sage software but don't bother paying for the support, so I doubt Sage will be sending any update disk to my clients, and I sure don't know how to reprogram T1 to be 12% VAT.

Also just in last few weeks I bought Sage and DIY accounting for new company which we open soon, if I knew there was a chance that the VAT rate would change I would have waited to buy the accounting software.

Alison
 
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Julies bookkeeping said:
Just went to settings on sage, and there is an edit button against tax codes, so am assuming it can be changed.
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Don't think the book-keeping end of things is the problem as mentioned above, most decent packages will have the "VAT rate" box where it can easily be changed.

I think it is the sharp end of the business where the problems arise, not the book-keeping end. I've already had one client on the phone who has about 2,500 separate items on their e-commerce website and is already panicking as they can't find anywhere to automatically increase or decrease the retail price within the parameters. There is the VAT rate box but changing that doesn't actually change the retail price, only the mix of net and VAT behind it. They seem to have a choice of keeping prices unchanged and therefore pocketing the difference (at an unspecified cost of loss of unhappy customers who see it as a con) or sit there manually changing the retail price of all 2,500 items. They're hoping their website designer can write a script at short notice.

I think the effect will be that retailers just don't change anything and pocket the difference. Yes, this may help the business, but the customers won't be happy. Also, if sales are as low as people seem to claim, it won't increase the sales if the customers don't see a price reduction. I think it disproportionately helps all retailers (even those who don't need help) and doesn't really help the average consumer enough. There are better ways to spread the dosh and help everyone.
 
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It is wonderful!!!

When things are ticking over they can bend us over again and again and again and then when the idiotic mistakes made come home to roost. We have to bail out the system every which way but bloody loose.

Just goes to show important these taxes really were to the economy!
 
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Philip Hoyle said:
I think the effect will be that retailers just don't change anything and pocket the difference. Yes, this may help the business, but the customers won't be happy. Also, if sales are as low as people seem to claim, it won't increase the sales if the customers don't see a price reduction.
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It is businesses that need saving. It's the difference between giving a starving person a fish and giving them a fishing-rod. Save the businesses and you save a salary for a whole economic cycle. Let the jobs go to the wall and you will be left giving hand-outs to individuals for years until new jobs are created. Then sales will not decline by a few percentage points, but will crash by large fractions.

Let businesses keep their prices unchanged. If customers are unhappy they will go elsewhere if elsewhere sells it cheaper. If businesses simply charge the same net amount, there will be cheaper prices. But which retailers can afford to do that?

If none can, the customers will have to carry on paying the same prices as before (no change for consumers, retailers benefit). If a retailer can afford to drop prices, then they are either sufficiently profitable already (consumers benefit, no change for retailers) or they will soon go bankrupt anyway (consumers have no choice, other retailers benefit).

How else would you save businesses from making millions redundant? Lend them money directly? Banks have the know-how, governments do not. Cut Corporation Tax? But the businesses have no profits. Maybe governments should start making grants to industries, rather than to banks? But then banks buckle and savers (especially the endowment mortgage generation) will be paying for this recession.

Incidentally, where is the money coming from to pay for these bank bail-outs? Does anybody know? The government can't borrow it from the banks! So will we all be taxed £16,000 each, extra, over the next few years? Or does the government simply intend to print more cash and give it to the banks (increasing inflation in some sectors, but if all governments do it - as they seem to be - the forex rates won't collapse but just recalibrate)? Does anyone have any ideas on this?
 
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DuaneJackson said:
Ahh, the beauty of web-based software. Wouldn't cause any problems at all for KashFlow customers. And if it did, we can fix it instantly for everyone at the same time.
Click to expand...

Same applies for Xero customers of course:D

The change does put more burden on the smaller businesses and I will eagerly await the price of parking to be reduced, a particular bug bear of mine!!!
 
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I'm so annoyed about this VAT change. It's being done at the busiest time of year and as it's just for a year is going to cause two extra troublesome periods where systems needing changing.

Small businesses might have to reduce their prices if customers expect it, then customers who were paying the higher prices on subscriptions etc. will also expect reductions. Then when VAT goes back up they will have to increase prices again, which looks bad to regular customers, or absorb even more of a reduction in income.

Can't VAT just be scrapped and tax be increased. The complexity of being VAT registered is a real hindrance to many start-ups and no doubt contributes to quite a few failing. There would be far more entreupeners and prosperity in this country if the processes of running a business were made as simple as possible.

Rant over.
 
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I bet it will take a few weeks for people to get it right or even months, I really dont envy anyone with a big shop and lots of stock...:|
 
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It was the November of 1991. I was working for a large retailer and we kept retail prices the same and absorbed the increase. Reverse of what will happen no I think:)

Mister B
 
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