The retailers’ favourite time of year?
It seems to come around sooner every year, and here it is again Christmas. The lifesaver of retail businesses all over the UK. Not so many years ago it was a relatively quiet time of year in petrol retailing. In those days there’d be a little rush of extra fuel volume on Christmas Eve as punters filled their cars knowing that many sites would be closed for the next couple of days. The few that opened on December 25 or 26 expected to sell little more than batteries and tobacco. There’d be another rush between then and New Year’s Eve as motorists prepared for another couple of days with sites closed for the New Year. But as we head into the second decade of the 21st Century times have changed and, for many petrol retailers across the country, this is one of the more important sales seasons. But this extra sales season does bring a few chores of its own.
Stock, cash and insurance
Many forecourts now sell alcohol. Some sell lots of it and may not realise just how valuable the alcohol stock they’re carrying is at this time of year. It’s not like the summer ’BBQ season’ when the big stock items tend to be relatively cheap plonk and multipacks of lager. No, at Christmas it tends to be the big-ticket items scotch, gin and brandy, not forgetting the sherry, port and classier bottles of wine. Just look at the cash and carry prices of some of the more popular lines: Jack Daniels at £82.50 per case of six bottles; Courvoisier at £86.50 per case; Baileys liqueur at £52.30 a case and those are all before VAT. Remember that this stuff is far more attractive to the criminal element than motor oil or antifreeze. Apart from tasting better it’s a darn sight easier to sell on, especially at this time of year.
With the seasonal sales mix, you may well be carrying several thousands of pounds more alcohol stock than at any other time. And it’s quite likely that there’ll still be a fair proportion of it in store between Christmas and New Year’s Eve. Very much the same situation arises with tobacco. It’s no accident that at many times in the past 100 years or so, cigarettes have been more valuable as a currency than bank notes. They’re immensely exchangeable in all sorts of criminal activity and there’s no shortage of demand. Two questions that need to be addressed then: is that valuable, attractive stock securely under control? And does your insurance policy cover the additional value of that stock?
Of course, if you’ve got the demand and supply right, you’ll be converting the stock into sales. Great, well done. Just remember that there are several days of ’bank holiday’ coming up and you may end up with rather a lot of cash. That’s paper money and coinage that’s also still fairly attractive to thieves, and for which your usual means of disposal may not be open. Some retailers deal with this by taking their ’banking’ home for Christmas, others leave it on site in the safe. In either case you need to be sure that the amounts and locations are covered by your insurance policy it’s quite probable that any off-site cash may be subject to very restricted cover.
VAT rate change (again!)
Changing VAT rates in the New Year seems to have become a bit of an annual ritual in recent times but, just in case it had slipped your mind, the increase in standard rate to 20% is due on January 4. The lower (5%) and ’zero’ rates remain unchanged. It could have been worse at least they haven’t chosen New Year’s Day so you might have a few quiet days to make sure that all of your POS and back-office systems are ready for the change.
For many retailers the most time-consuming part of the change is the need to update shelf-edge and item price labels. The basic law is that all retailers are required to display their prices inclusive of the correct rate of VAT. However, under the Price Marking Order 2004 (SI 2004/102), they are permitted to let consumers know for a period up to 14 days, by way of a general notice, that an adjustment in price to take account of the VAT change will be made at the point of sale. Just make sure that your ’general notice’ is quite prominent and easily seen by all customers perhaps right over each till point? Now to clear up one issue that crops up whenever the VAT rate changes. There is no legal requirement for a retailer to actually increase their sales price in line with the VAT increase. You may, if you wish, continue to sell a packet of cigarettes for £6.25 in January just as you do in December. Just remember that if you do so, you’ll be paying HMRC 93p in VAT on the December sale, and 104p on the sale after January 4. It’s entirely your choice.
The staff Christmas party
Although in these straitened times many employers have cut back on staff parties and the like, there will be many others who decide to reward their hard-working staff with an annual bash ’on the company’ sometime around now. We’re often asked about the tax and VAT implications of this expenditure usually after the event and as with everything related to tax, the rules can be a bit complex.
To keep it as simple as possible, what is ’tax allowable’ and ’VAT reclaimable’ has to be considered from each angle separately:
To avoid liability for PAYE/NIC the entertainment has to:
l Be annual ie once per year.
l Be open to ALL employees.
l Cost less than £150 per head.
For the VAT to be reclaimable by the business, the entertainment has to:
l Be open to ALL employees.
l Be open ONLY to EMPLOYEES that means no guests, no customers, no former employees!