Retailers urge Darling to delay VAT increase

UK retailers have urged the Chancellor to delay the increase in the VAT rate scheduled for December 31 in order to minimise disruption to stores' Christmas trading.

Increasing the VAT rate to 17.5% on 31 December from the current 15% rate, would cost the sector around £90m to implement, the British Retail Consortium has estimated.

The BRC has urged Chancellor Alistair Darling to delay the planned reinstatement until at least February 2010.

Stephen Robertson, BRC director general, said: 'Retailing is facing the toughest trading conditions in decades, with predictions of 15% of shops closing and up to 200,000 job losses. Retailers don't want handouts, but we can't cope with increasing government-imposed handicaps.'

The retailing sector spent around £90m last December to implement a cut in the VAT rate to 15% from 17.5%, according to the BRC.

Robertson added: 'Changing VAT rates back to 17.5% at the end of December will soak up a lot of effort at the busiest and most important time of year for most retailers. For some shops post-Christmas sales are 50% above normal – so it's a time when staff should be focusing on serving customers.'

The call to delay the VAT increase by at least a month is part of the BRC's Budget submission published today.

The submission includes requests to relax tax and business rates. Keeping increases in the minimum wage below 1.5% and cancelling the proposed 0.5% increase in employee and employer NI contributions, the BRC said.

Proposed property tax changes, such as the revaluation of business rates, could see retailers' property costs increase to £7bn by 2010/11, the BRC said.

Further reading:

Vat increase planed for worst possible times – says BRC