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Retailers lobby against New Year VAT hike

Businesses are campaigning for the Government to delay increasing VAT on New Year’s Day to avoid an administrative nightmare for firms and confusion for shoppers

The VAT standard rate of 17.5% was sliced to 15% earlier this year as a temporary measure to help businesses through the recession. Although criticised at the start, retail sales in the high streets climbed 2.9% last month – the fourth rise in six months hinting that the VAT cut, early summer sales and good weather have lured customers back to the shops.

Business leaders fear changing the VAT rate at the New Year will cause havoc on the high street because millions of tills and price labels will have to be changed overnight to accommodate the tax rise back to 17.5%

A Treasury spokesman said there were no plans to change the VAT rise date.

 “The Government’s intention has always been that the rate of VAT will return to 17.5% from January 1, 2010,” he said.

Lobbying the government are Sir Philip Green, who owns BhS and Arcadia, and the heads of Sainsbury’s, Marks and Spencer and Carpetright.

Sir Philip called the proposed VAT rise an “administrative nightmare” for retailers and for shoppers taking back unwanted gifts after Christmas asking for a refund.

“What rate do you give the refund? It will just add to the confusion,” he said.

Marks and Spencer chairman Sir Stuart Rose, who belongs to Prime Minister Gordon Brown’s business council, said: “We all want to be able to focus on delivering a fantastic Christmas and New Year for our customers, not on administration. This will be an unwelcome distraction and I urge the Government to delay until mid-January at least.”

The fear is with the Treasury looking to make up £175 million, tax hikes and spending cuts are inevitable and the country just can’t afford to lose the money VAT contributes to the government’s coffers.

VAT is charged on almost everything, except food and non-alcoholic drinks.  The Treasury forecasts during VAT reduction, consumers have saved £12.4 billion – or £476 for each home.


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