TaxCorporate TaxVAT cut causes a headache for companies

VAT cut causes a headache for companies

Change in value added tax to create many difficulties for companies, from changing prices and invoices to updating IT systems

treasury

The cut in value added tax is likely to create a series of headaches for
companies, ranging from the impact on year-end accounts and changing prices and
invoices to updating IT systems, experts have warned.

The VAT cut from 17.5% to 15% announced in the pre-Budget report earlier this
week was one of the centrepieces in Chancellor Alistair Darling’s statement in a
£12.4bn boost for the British economy aimed at reviving consumer spending.

But experts have warned that the tax cut ­ effective for 13 months from 1
December ­ is likely to cause difficulties for many businesses, particularly
retailers.

‘While the VAT reduction will be welcomed by many in the business community,
for some organisations it will be a lot more difficult to implement than people
initially think,’ said Ewen Ferguson, associate director at Protiviti, a
consultancy.

He added that many IT systems have the 17.5% VAT rate ‘hard-coded’ into them
within calculations. ‘To check and amend every system and spreadsheet could be a
massive task and may cause an unforeseen impact to year-to-date data,’ Ferguson
said.

Mark Welby, a VAT partner at BDO Stoy Hayward, said: ‘[The issue for
business] is how quickly their software can introduce price changes to bar
coding systems.’

For more, go to
www.hm-treasury.gov.uk

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