Watch out: standard VAT rate back to 17.5% from January 1 2010

As if the Christmas and New Year period wasn’t busy enough in the retail world, this year you have another job to add to your ’to do’ list. A year ago the government announced a temporary reduction in the standard rate of VAT from 17.5% to 15%, to be in place throughout 2009.

There’s been a great deal of speculation during these past 12 months that when this temporary reduction ended the standard rate might actually rise beyond the previous 17.5% figure. However it seems that those doing the speculating forgot one crucial factor, particularly as the year wore on. There’s going to have to be a General Election by next June at the latest, and it’s now much more likely that the expected hike in VAT rates will be left until after that event.

Hence, according to Revenue & Customs, the restoration of the 17.5% rate will take place from midnight on December 31 as originally announced.

For those businesses which are actively trading at that time (particularly clubs, pubs and hotels but not forgetting quite a few petrol retailers as well) HMRC has recognised that it will be impractical to re-set their VAT rates while trading, or to have to stop trading at midnight.

As a result, there will be special dispensation in place that allows such businesses to continue trading at the present rate until the end of that ’trading day’ 6am on January 1. But there are conditions attached. It is restricted to those businesses open at midnight on December 31, 2009 that account for VAT at the point of sale such as businesses on a retail scheme pubs, shops, restaurants etc. It will not apply to:

mail order or online retailers;

businesses that account for VAT on the basis of VAT invoices issued;

pre-payments for supplies of goods or services to be provided after 6am on January 1, 2010.

So, if your premises are open on New Year’s Eve and will be trading past midnight, you will need to run a day/month-end no later than 6am on the 1st and reset your VAT rates from that point onwards.


Price-marking of shop items following the VAT change

Although you’ll have to make sure that your point of sale and accounting systems are adjusted back to the 17.5% rate at the due time, you will have a little more leeway as far as price-marking of shelf items is concerned.

The basic law is that all traders are required to clearly display their prices inclusive of the correct rate of VAT. However, for a period up to 14 days, they are permitted under the Price Marking Order 2004 (SI 2004/102) to let consumers know, by way of a general notice, that an adjustment in price, to take account of the VAT change, will be made at the till.

Just make sure that your ’general notice’ is quite prominent and can be easily seen by all customers perhaps right over each point of sale.


Remember PAYE Returns will be online in 2010

While we pointed out some time ago (Money Talk August ’09) that paperless VAT returns were coming into effect from April 2010, it’s also worth reminding everyone that virtually all employers will be required to file their Employer Annual Return (P35 and P14s) online from the 2009-10 tax year onwards. The 2009-10 Return is due by 19 May 2010.

This is not a problem for those employers already using an established payroll bureau, since most of those have been submitting electronic returns for several years but anyone still doing their own payroll calculations and submitting information on paper should start planning for the changes now.


Why you must remember your limits...

No, we’re not talking about alcohol, exactly (although that does come to mind as another reminder for this time of year...) but about cash and stock levels on site.

Because of the usual staffing ’issues’ around this time, as well as the simple need for even the most dedicated retailer to take some time away from their business over the holiday period, there’s often a tendency for basic housekeeping to be allowed to drift a little.

Perhaps a temptation to leave cash on site in rather larger amounts than usual (after all, the banks seem largely closed for a week as well) or to entrust someone else to do the banking for you just once during the holidays?

Even if you remain careful about the cash side, how about leaving extra stocks of tobacco and/or alcohol out of the secure store room so that the staff don’t sell out while you are away?

But before you do any of this, just have a look at your insurance policy. Usually there will be specific limits on the value of cash and particular stock items (cigarettes, for example) that are covered in the event of theft or other loss.

Some retailers may already have allowed these values to slip a little over the years, but in any case there are usually rather more ’valuables’ on site at this time of year.

Don’t get caught out. Either ask your insurers beforehand to raise the limits to more realistic levels (and, of course, expect an additional premium charge) or make your arrangements so that you don’t end up with large amounts uncovered.

Now that sounds like a good rule for everyone over the festive period.

Here’s wishing you a peaceful and prosperous 2010 from all at EKW Group.