News

December 18, 2009

Firms given extra two weeks to adjust prices for Jan VAT rise

The Government has bowed to pressure from business groups and given firms an extra 14 days to adjust their prices when the VAT rate returns to 17.5 per cent on 1 January.

The announcement comes in response to a campaign from the British Retail Consortium (BRC) calling on the Government to amend the Price Marking Order, to give retailers longer to change shelf and product labels. The decision means that businesses will have 28 days to change their price labels from 1 January 2010.

“This change will give retailers more time to achieve this huge, costly exercise, without undermining their key mission, especially at sales time - serving customers,” said BRC director general, Stephen Robertson. “Re-pricing thousands of items and updating IT systems is a major undertaking and will have to be done during most retailers’ busiest and commercially most important time of year.”

British Chambers of Commerce spokesman, Sam Turvey, welcomed the announcement. “It will be more viable for small retailers to re-price their products within the extended time period,” he said. “The extra fortnight should allow businesses to do this without the cost of paying staff to work overtime.”

The Association of Chartered Certified Accountants’ head of taxation, Chas Roy-Chowdhury, said that the VAT change will be onerous for all small firms. “The extension to re-pricing is helpful, but there are still other issues such as the business needing to account for the right amount of VAT, which could be difficult for some firms,” he said.

“Invoicing this year must clearly state that the VAT rate is 15 per cent, and invoicing from 1 January onwards will show that it is 17.5 per cent,” added Roy-Chowdhury. “Businesses need to very careful that they are charging clients the right rate.

“If firms are unsure of the changes, they should visit the HM Revenue & Customs website or ask their accountant to make sure that what they are doing is correct,” he said.

Roy-Chowdhury added that retailers selling online will find the transition easier. “It is much easier to change pricing onscreen than to change price labels,” he said.

Founder of retailer A Suit That Fits.com, David Hathiramani, said that although the VAT increase will affect his business, he has also benefited from the temporary decrease because it has enabled him to pass on his savings to his customers.

“We’ll have to amend some of our systems, which will take some time and effort,” he said. “However, as all our prices are online, the prices can be changed relatively easily.

“The VAT change that we had this year has definitely helped,” added Hathiramani.