Maybe it’s a sign of growing old, but do you ever get the feeling that Budgets ain’t what they used to be? Remember how we all used to sit around the radio on the afternoon of each Budget Day and wait anxiously to hear how much the then-Chancellor (of whatever political hue) was about to add to fuel, tobacco and booze prices; got ready for the huge queues of customers crowding onto the forecourt by late afternoon to fill up their tanks and stock up with fags before the dreaded 6pm increases came into effect everywhere simultaneously, and sat back counting your windfall profits if you’d been lucky enough to stock up the site in the preceding few days? Well, in case you missed it, the Chancellor delivered another ’Budget’, of sorts, on March 22. That was his tenth on the trot and each one less immediately memorable than the last. With each passing year we have had to dig ever deeper into the myriad of Treasury and HM Revenue & Customs press releases to try and find what changes have actually been ’announced’. There are a couple again this year, but they’re not likely to result in a sharp intake of breath from most petrol retailers.
STARTING WITH THE OBVIOUS
The announced Duty and VAT increases of 9p on a packet of cigarettes, 8p on a pack of roll-your-own and 3p on cigars. Most forecourts long ago gave up trying to compete with the supermarkets and are already ’premium pricing’ tobacco to such an extent (presumably on the basis that if the punters are desperate enough to buy them from a petrol station then they’ll pay more or less anything for them) that the increases will probably have little effect on sales, although a few sites might actually have to reduce those ’premium’ mark-ups a fraction to stop their prices looking too ridiculous. For those sites selling alcohol, the increase of 4p on a bottle of wine isn’t likely to make much difference to sales either.
On the fuel side, the headlines immediately after the Budget seemed to be suggesting that fuel duty had been left completely untouched this time around - not quite. What has actually happened is that the Chancellor has hedged his bets again: the increases of 1.25 ppl on petrol and diesel duty (effectively 1.5ppl with VAT) have been formally ’announced’ but as in the past couple of years they aren’t planned to take effect until September 1, 2006. That gives the government time to look at what happens to the oil market during the next few months and decide whether they can risk provoking another series of fuel protests in the autumn, or whether they should leave well alone and look generous. Of course, every time the market adds another couple of pence to the pump price the government are collecting their share of the windfall in the form of VAT, so they don’t particularly need the extra duty to balance their books anyway.
IN THE SMALL PRINT
There is one VAT rate change likely to affect the majority of forecourts - with intended effect from July 1, 2006, ’contraceptive products’ will carry VAT at the lower rate of 5% instead of their current, 17.5% rate. It means retailers should ensure that their POS/BOS, stock and accounting systems are adjusted to categorise these sales lines at the correct rate. It sometimes seems that many retailers are rather careless about this ’lower rate’ of VAT. While most of you are concerned not to sell ’zero rated’ or ’exempt’ items as ’standard rate’ (presumably because the loss of profit is quite noticeable), the 5% rate is often ignored and gets bundled into either of the other two categories. On the one hand that carelessness will land you in trouble with HMRC, on the other it will result in an unnecessary loss of margin.
And finally, buried in the technical stuff - for those running sites as limited companies, the starting rate of Corporation Tax has applied to company taxable profits of between £0 and £10,000; as from April this year that band disappears and the standard ’Small Companies’ rate of 19% will apply to all profits up to £300,000. In practice this won’t have a huge effect for most such companies. However for those running small sites under a limited company operation who have kept their profits within the business, this move does effectively mean a tax increase from April.