Vat Cut & Iom Govt Income

[When Skies Are Grey]

Official IOMC&E web link

[oldmanxfella]

Official IOMC&E web link

 

So the OFT were talking through their arses then?

[manxman8180]

No, not at all.

 

They will collect less VAT, as per the Common Purse Arrangement. However, there is no obligation for them to reflect this in their selling price.

 

Therefore, any excess will be additional sales revenue.

 

So whether prices will go down is up to the retailers.

[Tempus Fugit]

as I see it, this is all hearsay until you get an instruction from the vat office !

The uk say they will be notifying all vat registered businesses

clicky

 

some of it may be a bit of a headache to keep track of :

For your standard-rated sales, it depends how you normally account for VAT:

 

If you are a retail business making mainly cash sales to customers not

registered for VAT (e.g. a shop, restaurant, takeaway, hairdresser)

You should use the new rate for all takings that you receive on or after 1 December 2008 …

 

… except for where your customer pays

for something they took away (or you

delivered) before 1 December (e.g.

where customers have an account with

you).

 

In this case, your sale took place before

1 December and you must use the old

rate of 17.5%.

 

 

If you are a business that sells mainly to other VAT-registered businesses and

have to issue VAT invoices

 

You should use the new rate for all VAT

invoices that you issue on or after 1

December 2008 …

 

... except for where

you provided goods or services

more than 14 days before you

issue the VAT invoice. For

example, if you issue a VAT

invoice on 1 December for goods

or services provided before 18

November 2008, or

you were paid before 1

December.

 

In these cases, your sale took place

before 1 December and you must use

the old rate of 17.5%.

 

so you could have some items at 2 different rates on the same invoice ?

[Slim]

Got to wonder how much this is costing retailers. Just been to town, and the chaos in Game and HMV as they apply the price, then apply a VAT discount code, then try to work out how to deal with vat on trade-ins and returns through the tills. I bet there's a ton of misprice errors too.

[TomTucker]

any news on how long this is going to last?

its all well and good retailers not changing prices but only while their shelves are stocked at the old vat rate.

[Chinahand]

Willow - I think you have a fundamental misunderstanding of how VAT works in a VAT registered business - it matters very little when the stock was purchased or under what VAT rate.

 

A shop or whatever buys a whole load of stock - it has to pay a certain amount of VAT for that stock - lets say X. As the business is VAT registered it then claims back X from the government - ie it doesn't pay ANY VAT on its purchases.

 

It then sells the goods - if they were sold last week it collects 17.5% on top of the gross price, if they are sold next week its 15%.

 

It then gives this money to the government.

 

The old stock - purchased at the old VAT rate - is simply not relevent to any of this.

 

The post about goods sold on credit which are then invoiced after the new rate came into force is relevent; and these should be charged at the old rate, but has NOTHING to do with stock purchased at the old rate. VAT is down to sales - if the goods were sold before 1/12 then its 17.5%, after it 15% - when they were actually paid for doesn't change this; nor does when the stock was bought.

[TomTucker]

Willow - I think you have a fundamental misunderstanding of how VAT works in a VAT registered business - it matters very little when the stock was purchased or under what VAT rate.

 

A shop or whatever buys a whole load of stock - it has to pay a certain amount of VAT for that stock - lets say X. As the business is VAT registered it then claims back X from the government - ie it doesn't pay ANY VAT on its purchases.

 

It then sells the goods - if they were sold last week it collects 17.5% on top of the gross price, if they are sold next week its 15%.

 

It then gives this money to the government.

 

The old stock - purchased at the old VAT rate - is simply not relevent to any of this.

 

The post about goods sold on credit which are then invoiced after the new rate came into force is relevent; and these should be charged at the old rate, but has NOTHING to do with stock purchased at the old rate. VAT is down to sales - if the goods were sold before 1/12 then its 17.5%, after it 15% - when they were actually paid for doesn't change this; nor does when the stock was bought.

 

Chinahand, as condescending as ever.

 

you imply that shops or businesses will be repricing their stock, i am refering to businesses that dont reprice and simply collect the same figure for the goods as prior to the 1 Dec. these businesses will then pay IoM Gov 15% VAT but the full 17.5% will still come out of their customers pockets and be an equivalant of an extra 2.5% revenue for said business.

 

my question was how long will this last?

[TerryMcCann]

Chinahand, as condescending as ever.

 

you imply that shops or businesses will be repricing their stock, i am refering to businesses that dont reprice and simply collect the same figure for the goods as prior to the 1 Dec. these businesses will then pay IoM Gov 15% VAT but the full 17.5% will still come out of their customers pockets and be an equivalant of an extra 2.5% revenue for said business.

 

my question was how long will this last?

 

As long as the retailers want it to. They are under no obligation to pass the saving onto customers.

 

How many people will actually know what difference a VAT reduction would make to the prices of individual items anyway? Other than for high value items I doubt many retailers will even bother reducing their prices (though I dare say they will put prices up on 1 Jan 2010)

[Miss Take]

As long as the shopkeeper wants it to last - there is no obligation at all to pass the VAT cut on to customers - it's just unworkable. Sales price is made up of net cost plus margin plus VAT (on VAT registered items). The government only controls the VAT - the shopkeeper can do what he likes about margin (whilst remaining competitive) and cost is under his suppliers' control.

 

I suggest if you're that worried about the 2.5% deduction not being passed onto you - shop around.

[Miss Take]

JINX, McCANN!

[Tempus Fugit]

an equivalant of an extra 2.5% revenue for said business.

my question was how long will this last?

 

if you get your maths right, it's 2.13%

 

a £1 item is now 97.87p, wow !

[Chinahand]

Fugit when doing percentage increases and decreases you've got to be very careful about your denominator.

 

Willow is right - for the business they add the VAT onto the net amount - for example they have an item for £10 - the government insists they get given 17.5% ie £1.75 - so the retailer sells it for £11.75, gives the £1.75 to the government and keeps the £10 for himself.

 

The government then changes VAT and says give us 15% of net amount - ie they want £1.50, not £1.75. The shop decides NOT to change its prices so still sells it at £11.75 - he now gets £10.25 for the item - a 2.5% increase in his turnover.

 

Your example is the change in the GROSS price - but the shop keeper doesn't deal in GROSS - that's him AND the Government together. The shop keeper is only concerned with NET amounts.

 

The Government on the other hand is having its VAT take cut by 14.286%!

 

Edited to correct the fact I know jack shit!

[Tempus Fugit]

Now then Tempus Fugit when doing percentage increases and decreases you've got to be very careful about your denominator.

 

Willow is right - for the business they add the VAT onto the gross amount - for example they have an item for £10 - the government insists they get given 17.5% ie £1.75 - so the retailer sells it for £11.75, gives the £1.75 to the government and keeps the £10 for himself.

 

The government then changes VAT and says give us 15% of Gross - ie they want £1.50, not £1.75. The shop decides NOT to change its prices so still sells it at £11.75 - he now gets £10.25 for the item - a 2.5% increase in his turnover.

 

Your example is the change in the NET price - but the shop keeper doesn't deal in NET - that's him AND the Government together. The shop keeper is only concerned with Gross amounts.

 

The Government on the other hand is having its VAT take cut by 14.286%!

 

you've got a queer idea of things and getting yourself well confused !

 

you have your gross, nett and tunover all mixed up, I hope I never have to buy anyting from you !

(get some new balls in your abacus )

meanwhile I'll just carry on adding 15% to my nett goods prices to get gross and give the vat man 6/46ths !

[The Old Git]

Chinahand - I think the point being made is that a VAT reduction from 17.5% to 15%, if fully passed on, would result in the item's price going down by 2.13%, and not the 2.5% that some people seem to be expecting

 

 

ETA - I think there's also some confusion in the last few posts over the term nett, meaning the selling price ex VAT or meaning the cost price of the goods to the retailer