About this VAT reduction (2.13% off prices)

squidworth

(sorry if its in the wrong place)

A quick word of calm about the VAT decrease and who is implimenting it

Yes the VAT reduction is law but...

Smaller companies may take a few days to be to update their systems, bigger companies (and Amazon Marketplace traders) may have to wait whilst the systems upload the new rates so expect delays there for a bit.

Also its been years since the last major change so IT systems will need to be tested and retested and checked and tweaked, and its less than a week since this was officially announced so there may be some delays there.

Sometimes the final retail price may be contractularly set for whatever reason and the retailer may not be able to simply reduce the end price without renegotiating.

Any reductions so far are not VAT reductions but sellers dropping prices, VAT is still 17.5% until midnight tomorrow night.

And dont forget the reduction is 2.13 pence in the pound and not 2.5p as the darn tv kept incorrectly telling people last weekend!!!

So please dont blame the retailers, any delay is not always their fault!

I'm sure most of them, especially these days, dont want to be seen as the ones who didnt drop their prices in the spirit of the cut and are working hard to make it happen ASAP - especially in the week or two of online shopping left to chrimbo!

Me? I did all my chrimbo shopping last month to get it done in time, ugh!

Jami74

In Tescos some items have a bit of VAT taken off at the tills, I think that started Saturday.

ajbaker

But I wonder how quickly they will increase their prices when VAT is increased once more.

PBA

squidworth wrote: »

So please dont blame the retailers, any delay is not always their fault!

But then most retaliers sell all kinds of goods which have different rates of VAT, so their systems should be able to differentiate. Fair enough shops might not have enough manpower to change all the shelf edge tickets, but then the prices on the computers should still be correct so the only problem should be that customers are charges less that yey expect (not a bad thing!)

Roger_Rampant

Sometimes the final retail price may be contractularly set for whatever reason and the retailer may not be able to simply reduce the end price without renegotiating.

That's nonsense. The whole reason that there are Recommended Retail Prices now is because you cannot force anybody to sell at a certain price, and that's enshrined in consumer law. The VAT portion of the selling price is given to the government.

Craigoldfield

ajbaker wrote: »

But I wonder how quickly they will increase their prices when VAT is increased once more.

That'll just be one press of a button.

jamesh316

What happens in general retail is that when a item is purchased, be it scanned through a till Epos system/online system or just sales accounted for in your daily/weekly turnover, the retailer is required by law to pay the customs and excise department the current rate of Vat on the price that the item has sold for.

What this means is that legally retailers are under no instruction to pass on the reduced Vat rate. As it is legally up to the retailer to decide where to pitch their retail prices. All this means is that instead of paying 17.5p to the government per £1 of sales, they need now pay out only 15p.

So now lets consider that you own a shop, retailers try hard to set retail prices to nice price points, for example "under £10" £9.99 or "under £1" 99p etc. When purchasing there may usually be a minimum profit margin that a retailer would wish to make in order to keep themselves in business, and they will generally apply this plus Vat to the purchase price to come up with a selling price. Lets use a simple example of something that costs 60p +vat, after applying the mark up that they are looking for, the retail on this product may come out with a figure for arguments sake of 96p and therefore they decide to round this upto 99p. They will then need to pay the government the Vat rate against the retail price of 99p when ever they sell one of these.

Now as someone mentioned at the top, we are saving only 2.13p in the £1 by the Vat reduction, the retailer is now faced with his original price of 96p being reduced to just shy of 94p. Now tell me if it were your business that you wouldn't just leave your price at 99p. The only difference is that now rather than having to pay the government 14.7p for every 99p you put through the till, the retailer now pays them 12.9p in Vat.

If you consider now what you spend your money on in the month, I would expect most household top expenditures would read something like:
1 - Mortgage or Rent
2 - Food and Drink
3 - Utility bills (gas/electric)
4 - Petrol in the car
5 - Fags (if u smoke)/alcohol

Now food itself is mostly vat free anyway, where you pay vat on are luxurys such as sweets, chocolate biscuits, soft drinks, alcohol etc. So the cut makes little or no effect on your 1st or 2nd major expense each month.

Vat on fuel bills such as utilities, coal and lpg gas is set at 5%, and this change has no effect to that rate. And i'll lump these 3 together Petrol, Alcohol and fags, whilst the goverment has reduced the vat on these products it has at the same time increased the duty on them, keeping them at exactly the same price, but making more tax on them!

So from your top 5 out goings each month, you just saved absolutely nothing! What they've done is saved you money on a few of the things you could cut back on, that being everything else you buy, the Non essentials. Whereas for the average household it would have been much better to drop the 5% vat rate on utilities and show us a further saving on Petrol, and maybe some alcohol as we're all trying to stay in a bit more. But where they have saved you money, all they have really done is made a talking point for retailers to best, such as Asda doing Vat free TV's at the weekend, but who's to say that they wouldn't have done a 20% sale anyway, as they are obviously having trouble selling luxury items such as TV's right now. So we shouldn't thank the government there.

The Vat increase in reality means very little to you and I, I believe that when this all started someone on TV mentioned that it may save the average family around £10 a week. Yes you'll save a lot more if you are buying something ultra expensive such as a new £14,999 car after monday, but are you really telling me that in the current retail climate that you couldn't have wangled more than £319.12 off the price yourself without the governments help?

Just dont believe the hype!

squidworth

Totally agree about the sham bit, 2.13% off doesnt even cover the past years inflation and the extra 0.5% on your income tax (aka National Insurance) wont help.... for most people the largest chunk of their outgoings are VAT free or low VAT anyway (mortgage, rent, energy, etc).

I know some online retailers have the 17.5% pretty much fixed in their code as thats all they sell at so its not a simple button push.

Anyone who drops the VAT before 1st december is breaking the law, simple. Of course they can reduce prices and pick up the difference themselves, thats something different.

As for fixing prices, aside from "why were all xbox's the same price for years", if (for example) you're selling licensed goods branded with a famous name (music band, team, tv personality, etc, etc) then you may well have an agreement with that names brand owner to sell at a certain price. The price isnt fixed, its agreed with the brand owner and needs their permission to change it.

For Amazon marketplace, its up to the marketplace seller to re-upload their items at the new price. I know sellers with 100'000's of items (each size/colour/etc is a different item) and to physically upload the data will take a day or two and it can take Amazon days to process these, especially if everyone is doing it on Monday.

And only a weeks notice didnt help, when going back the other way I suspect there will be plenty of notice and sadly little reason not to do it on time.

edit: and dont get me started as to the reasons why... we are in this mess because of too much debt spent on non-essentials and what is this cut supposed to do? make us spend more on non-essentials!

ixwood

Yep, it was a cunning plan to make us spend more on non essentials. Pretty pointless really!

ChrisCar_2

Please don't expect all small businesses to be reducing their prices either. A lot, like us, are not VAT registered. There isn't a VAT element in our prices to play with.

squidworth

Good point ChrisCar! Judging by the time were you up as well at midnight checking that things went ok? lol

In case anyone was wondering here is why its 2.13% not 2.5%

If something was priced at £10 then that would be an item at 8.51 with 1.49 vat (17.5% of £8.51 is 1.49). The same 8.51 now has 1.28 VAT (15% of 8.51 is 1.28) making it 9.79, making a reduction of about 2.1%