Vat Cut & Iom Govt Income

[alibaba]

Hello.

 

I work in a small grocery shop. This morning I have had a delivery, including tobacco. The VAT has gone down, but duty has apparently risen to match this so that the gov doesn't loose any revenue. So, on all cigarettes and tobacco the actual cost price to us, the retailer, has risen. So I have to change all the cost prices of all these products, which will have the effect of changing the margins. So to keep the same margins I now have to put the price of cigarettes up. I would imagine that this will be the same for alcohol as well, but I don't know for sure.

 

So the VAT drop is a con. And a pain in ass to me.

[Chinahand]

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 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%!

 

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 !

OPPS - the only thing I've got mixed up are the words NET and GROSS - I fully admit the mistake and I've now corrected it with the changes highlighted - BUT the maths is correct. IF a retailer does NOT reduce his prices his Turnover goes up by 2.5% - I am basically certain I am correct in my analysis - on an item retailing at £11.75 previously the shop keeper got £10 now he gets £10.25.

 

If he cuts his prices the price will drop by 2.1277% ie (11.75-11.5)/11.75

 

But I say if he does not cut his prices his Turnover will go up by 2.5% (10.25-10)/10

 

Do the maths.

 

Edited: talking out of ass!

[Chinahand]

Hello.

 

I work in a small grocery shop. This morning I have had a delivery, including tobacco. The VAT has gone down, but duty has apparently risen to match this so that the gov doesn't loose any revenue. So, on all cigarettes and tobacco the actual cost price to us, the retailer, has risen. So I have to change all the cost prices of all these products, which will have the effect of changing the margins. So to keep the same margins I now have to put the price of cigarettes up. I would imagine that this will be the same for alcohol as well, but I don't know for sure.

 

So the VAT drop is a con. And a pain in ass to me.

That's interesting Alibaba - how does Tobacco duty work - compared to VAT?

[Slim]

So the VAT drop is a con. And a pain in ass to me.

 

I certainly don't think it's worth the effort for most, althoug shops seemed pretty busy with 'vat drop' mania, so like so many things the sentiment might be more important than the actual value.

 

Given the rise in duty on petrol, fags and boose, I wonder how badly the IOM VAT take will be hit after all? It's worth noting that VAT is apportioned under the common purse by population. Booze and fags are apportioned by population plus visitors, so with the ratio changing, we might be in for a little boost in duty payments under the common purse?

 

Certainly justifies making an effort to encourage visitors if it means we increase our common purse cut as a result.

[xbones]

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 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%!

 

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 !

OPPS - the only thing I've got mixed up are the words NET and GROSS - I fully admit the mistake and I've now corrected it with the changes highlighted - BUT the maths is correct. IF a retailer does NOT reduce his prices his Turnover goes up by 2.5% - I am basically certain I am correct in my analysis - on an item retailing at £11.75 previously the shop keeper got £10 now he gets £10.25.

 

If he cuts his prices the price will drop by 2.1277% ie (11.75-11.5)/11.75

 

But I say if he does not cut his prices his Turnover will go up by 2.5% (10.25-10)/10

 

Do the maths.

 

But if he's selling at £10.25 (NET) then he needs to add 15% (£1.54) to that - new cost £11.79

[Chinahand]

OH SHIT - Chinahand is a tit - I've got this totally and utterly wrong - slinks away feeling stupid!!!!

[thebees]

Oh this was going well until today......below is part of an email I received today after I made a little query. Lots of our customers use purchase cards & there can be a few days between the goods being delivered, the goods being invoiced & then the card payment taken so, now I have to phone people and tell them I cannot take payment from their cards, instead they must find another way to pay, this is especially going to be 'fun' with government card users.....

 

You should use the new rate of 15% for ALL transactions that you receive on or after the 1st December 2008, except for where your customer pays for something they took away or you delivered before 1st December. In this case, your sale took place before the 1st December & you must use the old rate of 17.5%. You should use an invoicing system, & the customer will have to pay via an alternative method than 'XXXX' , i.e BACS, cash or cheque, as the system cannot accommodate 17.5 % as it is now unavailable at the specification of the banking authorities.

 

How has the payment date got anything to do with VAT regardless of the invoice date? You dont 'not pay VAT' on your return because your customer has not paid the invoice do you? it would be rather good if you could do that, only pay VAT on paid invoices but that isnt the way it works, is it? so...Why are the banking authorities making this rule? it said earlier in the email I should ask a vat expert but I dont know any I could afford to talk to.

[Chinahand]

In accounting the important date is when the good leaves the premises - that is officially when the sale occurs. If the invoice or payment is made later than this its considered that they've had the good on credit.

 

I assume VAT works on sale date, so the VAT on any goods that left the premises before the 01-Dec-08 requires 17.5% vat; after 15%.

 

When they are billed isn't deemed relevent to the Revenue.

 

Lots of hassle - for a 2.5% stimulus - the German's don't think much of it!

[The Old Git]

If the invoice or payment is made later than this its considered that they've had the good on credit.

 

I assume VAT works on sale date, so the VAT on any goods that left the premises before the 01-Dec-08 requires 17.5% vat; after 15%.

 

When they are billed isn't deemed relevent to the Revenue.

 

I think the "tax point" used to be the invoice date. I don't think it's called the "tax point" anymore though

 

I remember when VAT went up customers were clamoring to get their invoice before the rise even though the goods hadn't been supplied

 

After the recent drop they were hoping to be invoiced after the drop, even though goods may have been supplied before the drop

 

I haven't read through the VAT regs for a while but I seem to remember the invoice date was more important than the supply date, although there wasn't meant to be too much time between them

[Chinahand]

I think you know more about it than me Old Git - but the circular TheBees recieved definitely talks about took away or delivered - that would be counted as a sale under the accounting I studied many years ago, so it makes sense to me.

[The Old Git]

Sorry, I hadn't picked up that you were commenting specifically to the bees circumstances. I was just commenting in general so probably not relevant.