PBR 09: Retail ‘disappointed’ over end of 15% VAT rate

Chancellor Alistair Darling confirmed in today’s pre-Budget report that the
VAT rate would return to 17.5% on 1 January 2010 as planned – a move that has
“disappointed many in the retail sector”, according to KPMG.

The Chancellor said that he “cut VAT to 15% for a year to put over £11bn into
the pockets of consumers and retailers” and added that he was not planning any
other VAT changes.

Gary Harley, Head of Indirect Tax at KPMG, commented: “While the return to a
VAT rate of 17.5% as of 1 January 2010 is not unexpected, it will still be a
disappointment for many in the retail sector who hoped for an extension.”

Andrew Garbutt, retail director at PwC, added: “For retailers who haven’t
passed the VAT cut on, the reversion to 17.5% will be added pressure on margin.
Overall the reversion will have a somewhat inflationary impact on prices for
retailers and consumers.”

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