Training Blog

VAT is value added tax; basically pretty much every item you purchase has VAT added to the cost price of the item. For example a chocolate bar costs the shopkeeper 49p for the consumer the cost of the same bar of chocolate is 52p at the old rate of VAT. Before 1st December 2008 the rate 0f VAT was 17.5%; the current rate is 15%.

The reason for the decrease in the VAT rate was an attempt to resolve the country’s economic crisis by encouraging people to start spending again although I should point out that it is temporary and the reduction will apply only for a short time which given the changes listed below will ultimately mean even greater expense for the companies. Unfortunately when the government decided to introduce this reduction they forgot to consider the sheer cost involved in amending the prices of every item. Not only do you have to ammend the prices on the actual item but you also have to reprogramme the software used to
process the sale (tills or software on online sales), another problem is that the brochures for next year have already been printed thus with the reduction they are now useless therefore it increases the cost to the company. It also generates a further problem because retailers have 1 of 2 options either they can pass the saving on to their customers and make a loss themselves as the wholesale price does not change, alternatively they can basically pocket the difference unfortunately there is no way to prove who is doing what.