My story with Dave, the kids, Cooper, VW's & rugby

VAT Rate Increase – Jan 1st 2010

For starters .. Whoever decided to bring the VAT increase in on the 1st January, New Years Day of all days? Do they not realise that most of the population will be recovering from the festivities of the night before and when the clock strikes midnight the last thing you want to be thinking about is whether your online store is charging the right VAT rate.

hm rev customs

For a bit of background, when the world economy started to slide into recession the UK government decided to lower the VAT (Value Added Tax) rate that is charged on most products and services from 17.5% to 15%, back in December 2008. This was in an attempt to get people back into the shops to try to stimulate the economy again. But at that time no one was spending anything, as people were trying to hold onto any spare cash they had not knowing if the next day the company they worked for would be in liquidation.

Changing the VAT rate down to 15% meant lots of extra work here at Bronco, changing lots of recurring invoices that go out for domain name renewals and hosting packages each month, reducing annual hosting bills by £1.50 and domain renewals by £0.43. Fortunately with the recurring invoices that are raised for the SEO clients a few are VAT exempt which is always nice! At the beginning of January we will have to do all this again to increase the VAT rate back to 17.5% and reset all the recurring invoices.

I can’t though imagine the task involved for much larger companies than us to get the invoices amended with the correct VAT rate and for the prices that go through the till or that are displayed on products in shops to be correct. M & S had the right idea and left all the price labels the same but when you went to pay you would get the extra 2.5% VAT knocked off. For them it will be a fairly straightforward (probably a massive job) software change, but I wouldn’t want to be the IT department who will have to be in on New Years Day. I’m sure that there were plenty of places that didn’t bother to reduce their prices when the VAT decrease came in, but that certainly will take the opportunity to increase their prices in January.

Does the UK government not realise that the cost to businesses will be high to bring the new VAT rate in as many will have to pay their staff double time since they will be working on a Bank Holiday. Why on earth couldn’t they bring it in mid month or at a time when businesses will be fully staffed? Crazy!

3 Comments

  • Richard

    This government has little if any consideration for business, particularly small and medium enterprises (SME’s) they seem to conveniently forget that it is these businesses that employ the most people overall, except for the government and civil service of course and who pays their wages? SME’s and their employees of course!

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  • spells online

    I think that quite a few things that the new Government is doing are very high risk – cutting police budgets by 25%, increasing VAT, demanding the repayment of underpaid tax (caused by HMRC’s error) immediately… the list goes on. Don’t get me wrong, the last Government made a mess of things, I’m just not sure that the coalition are doing a great job of sorting it out!

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