VAT and Retail Prices

indiebiz24

I run a small independent gift shop and have recently gone VAT registered. Just wondering if it's the done thing to still follow brands RRP's to stay competitive or do businesses tend to mark items up higher than the RRP to cover the VAT? The problem is I don't want to be charging a higher price for items where other retailers stick to the brands RRP but I also don't want to shrink my margins. Any advice would be much appreciated!

DullGreyGuy

Depends who you are... big luxury shops like Fortnums charge above MRSP because they argue they add more value than Tesco etc through the curation of what they sell and their customers appreciate that more than the cost. 

Most people sell things at or below MRSP because people are price sensitive and will go elsewhere if it's cheaper. 

For anyone selling stuff that isn't 0% rated they tend to put off registration as long as they legally can and then take the hit when they have to register. Clearly it won't be as bad as the full 20% because you have to factor in the VAT on your supplies that you can now recover. 

prowla

You have to be offering something special to be able to sell above RRP.

Grumpy_chap

indiebiz24 said:

I run a small independent gift shop and have recently gone VAT registered. Just wondering if it's the done thing to still follow brands RRP's to stay competitive or do businesses tend to mark items up higher than the RRP to cover the VAT? The problem is I don't want to be charging a higher price for items where other retailers stick to the brands RRP but I also don't want to shrink my margins. Any advice would be much appreciated!

In retail, the price you can sell at is market driven.  The shelf price includes VAT.
You then account for VAT so (at current rates), a standard rated item sold is 1 part for HMRC and 5 parts for the business.
You can claim input VAT as appropriate.
Do you have the advice of an Accountant?

Hoenir

Claiming the imput tax will provide some financial mitigation. 

penners324

Well the RRP usually includes VAT. If you were selling at RRP and not vat registered then you've benefited from higher .margins 

Bookworm105

you appear to be a consumer focused business, QED either customers
- are willing to pay above RRP
- are not willing to pay above RRP and your business will collapse
- or you need to take a hit to your margins until such time as your turnover grows to a level where your absolute income returns to pre vat level 

surprised you need a forum to tell you that