back to article Small biz calls for end date on enhanced 17.5% VAT

Small business lobbyists are calling on Chancellor George Osborne to review the 2.5 per cent hike in VAT once the UK budget deficit is back under control. From today the top rate of VAT goes up to 20 per cent. Retail analysts have warned that the real impact of this is likely to be price rises of between five and eight per …


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  1. Anonymous Coward

    drug dealers/addicts

    Need not be concerned by the increase in VAT.

    1. Lottie


      What about the VAT increase affecting the cost of bongs, grinders and baggies?

  2. Silver

    Doubtful it'll go down again

    According to George Osborne, the 2.5% increase will generate £13bn each year in additional revenue.

    On that basis, I can see that Labour and the Lib Dems will promise a VAT reduction as a central point in their next election campaign ... and whoever wins will get into power and suddenly realise that they'd rather not follow through with their promise on the basis that their budgets would go down ... oooo ... about £13bn a year.

  3. Anomalous Cowturd


    should be concerned by the decrease in available funds, due to government policy.

    I don't remember voting for less money in my pocket.

  4. Ian Ferguson
    Dead Vulture

    Not 'the 2.5 per cent hike in VAT'

    It's not a 2.5% hike in VAT, it's a 14.286% hike in VAT, from 17.5% of the untaxed cost to 20%.


    1. Steven Jones

      But you did...

      If you voted at all, you voted for less money in your pocket as whoever got in would have been increasing tax, pay would be relatively static and inflation would have continued.

      Of course none of the parties would have actually put it that way, but reality breaks through one way or another. We are still subsidising our lifestyles through State borrowing at an unsustainable rate.

      1. Tigra 07 Silver badge

        RE: Steven Jones

        Actually, while Cameron is getting 20% of the cuts from Tax, Labour were quite clear they would get 40% from new taxes.

        Between Labour and Cameron, Cameron seems more likely to make temporary taxes and not introduce pay-per-mile or yearly petrol increases or sign us up to the Euro as Labour had planned to.

        Some people seem to forget how deceptive Labour were/are and how they screwed so much money from motorists and Council Tax payers (to name a few)

    2. Number6

      But 2.1% more from the pocket.

      £1.20 instead of £1.175 is 2.13% more from your pocket. Of course, shops are going to round up the fractional bits, so it'll be more than that in practice.

    3. Pypes

      The title is required, and must contain letters and/or digits.

      Everybody voting to put more money in their pockets is what got us in the shit in the first place (in terms of bloated expensive government) with labours welfare-state 2.0 project.

      While I'm having a moan can I also point out that the welfare state is a reasonably new invention, and not a god given right, but we are now looking at the 3rd generation of some families who have grown up on benefits, where not working is not only an option but the norm. I'm all for the state keeping people from starving to death or freezing on the streets (it is, or was called social security remember) but the amount of money people seem to feel entitle too just for sitting round the house nowadays is ludicrous. Add to that complications like the need to create incentives like the working tax credit to ensure people who do decide to work actually end up better off than those that don't and it's no wonder the state can't make ends meet.

      I wish we had some sort of national inclination towards small government. That which governs least governs best.

      1. Tigra 07 Silver badge
        Thumb Down

        RE: Pypes

        Here Here!

        My brother has never had a job and has no reson to as he can live off the £50 a week he gets, it's like something out of Shameless.

        This must be how the BNP got so many votes in the last G.E

  5. There's a bee in my bot net


    I would suggest that the government starts selling RBS shares but then who would buy £80bn worth of RBS shares... are Bradford and Bingley still going? They owe £40bn odd don't they?

    1. 20legend

      are Bradford and Bingley still going?

      Yes, they are now called Santander.

  6. Juan Inamillion


    All I know is my cup of Cafe Nero coffee has gone up from £2.00 to £2.10, when, by my calculation it should be £2.05...

    It's probably a simple error by the cafe management, I mean, no one would try and fiddle in a price increase under the guise of a VAT increase, would they...?

    1. Steven Jones

      Note even £2.05

      In fact the actual increase should have been more like 2.1% as the actual ratio is in question is 1.2/1.175 (I blame the BBC as they keep calling it a 2.5% increase). Rounded to the nearest whole penny, your cup of coffee should have been £2.04.

    2. Old Tom

      Rip-off Britain in the 70s

      I remember going into the selling out shop with 2½ new pence just after VAT was introduced. The shopkeeper told me I could only have 4 ½p sweets for my money "the rest is the VAT". What a twat.

      We were still reeling from the decimalisation hit (10 penny arrow bars for 5p vs. 12 for 1/-).

    3. Suburban Inmate

      @ Old Tom

      Despite being the name of a delicious ale, could you please translate that into Newspeak for us under 30, cheers! ;-)

  7. Graham Marsden
    Thumb Down

    "real impact of this is likely to be...

    "price rises of between five and eight per cent as shops round up prices."

    Or small businesses having to swallow the rise to keep prices down to stay competitive :-(

    1. This post has been deleted by its author

      1. Anonymous Coward
        Thumb Up

        "but hey, I guess you'll never let facts get in the way of having a good whine."

        It's our patriotic duty to make things up and then complain about them.

      2. Fuzz

        Do you really run a business?

        surely you don't pay VAT on goods, it's the person buying your products/services that pays the VAT so the cost of your goods (i.e. stock) shouldn't have increased.

        VAT on electricity and gas is 5% not the standard rate.

  8. Peter Gathercole Silver badge

    Only affects very small businesses

    probably with a turnover of £50,000 or less. Over that amount, businesses have to register for VAT, and charge it on their services, and are allowed to claim back the VAT they pay on any business purchases against what they collect (yes, businesses acting as tax collectors for the government).

    The only thing it will do, however, is make their prices higher, as they will have to increase the amount of VAT they charge, but this will also be the same for their competitors. It will also force them to update the processes they use to work out the VAT. This should not be too hard, as they have had practice at changing the VAT rate for the last two years.

    The FSB do a good job on the behalf of small businesses, but this time I believe that they are saying something just so that they are not silent on the matter.

  9. Anonymous Coward

    BBC have reported ...

    the rise is being regarded as "permanent".

    watch out for more disguised tax hikes to offset the cost of the smoking ban ...

    1. JimC Silver badge

      >only affects small business?

      Eh? Last time I looked the way VAT worked was that if you are VAT registered you had to charge whatever VAT rate on everything you sell, and that *all* has to go to the government, but you claimed back the VAT on everything you bought, so the net effect is that you only pay VAT on your profits. I presume it also means that should you be running your business at a sufficient big loss, you might actually reclaim more VAT than you pay.

      The difference with a non registered business is that you don't have to charge VAT on what you sell, but you can't claim t back on what you buy, so the net effect is that the customer doesn't have to pay VAT on your profit margin, so your goods are a tiny bit cheaper and more importantly you don't have a shed load of extra paperwork and dealings with the nastiest bunch of taxmen in the known universe.

      1. Peter Gathercole Silver badge

        @JimC, it's not quite on profit, but Value Add

        You've pretty much repeated what I said, but at no point is it actually related to any profit (in the tax sense) you might make. VAT is related to sales and purchases which I do admit is INDIRECTLY related to profits. In any case, your VAT registered entity is not paying, their customers are, and you are acting as the tax collector.

        If you have ever filled in a VAT form, the calculation goes (this is simplified, because I am not considering cross-border VAT) as follows:

        Net VAT=VAT charged on sales minus VAT paid on purchases

        They also want to know your gross sales for the period and the value of any purchases, but these do not take any part in the calculation, they're just there to allow some form of sanity and fraud checking.

        It's that simple, and if you think it through, you as an entity registered for VAT are not paying any VAT at all on your purchases as you offset it against the VAT you charge (it's offset at the point of paying it to HMRC, not actually paid and claimed back). Your customers (who might also be VAT registered and passing it on) are paying it to you, and this re-curses down until you reach someone who is NOT VAT registered, and they end up actually paying without any way of offsetting it.

        When I was involved in running a company, I regarded it as a financially neutral operation, although I did begrudge the paperwork. The only thing that was not neutral is that if you paid your VAT quarterly, you could stuff the money in an interest generating account until you needed it to pay it to HMRC.

        The point I was trying to make is that you don't actually have to be a very big business to have to be registered for VAT, and if you are, it is neutral to you, although not to your customers. £50,000 might appear a lot, but if you have four staff being paid full time at national minimum wage, then you must be a good way to the threshold in order to be able to pay them. Any form of shop or pub almost certainly has more than £50,000 annual turnover, as this equates to less than £1,000 per week.

        As a result, your competitors are probably also registered for VAT, and in the same boat. It's only if you are competing against someone VERY small (under £50,000 PA turnover) that you will be at a disadvantage.

  10. Greg J Preece

    The decrease was temporary, the increase is permanent

    Sounds about right. And how strange that the train companies have megajacked their prices on the very same day! My daily train ticket (assuming I was stupid enough not to buy a season ticket) has gone up from £6.20 to £7.30 overnight. That's a hell of an increase!

    It's OK though, it's to get new rolling stock. Well, it's not new rolling stock, it's shitty hand-me-downs from London that we've had for years, so it's not costing us anything anyway. Enjoy (y)our increased wealth.

  11. Anonymous Coward


    Which is turn means you need a higher cash flow so you back to the bank to ask for more money who then ask for more security. Either way the banks win and we are crippled.

    Getting my coat to go and find a country that does not have a banking crisis..... hows Russia this time of year - at least they can deal with a little snow.

  12. Anonymous Coward
    Anonymous Coward


    "likely to be price rises of between five and eight per cent as shops round up prices."

    Why is it necessary to round up to 5 or 8% because the rate has increased by 2.5%? If I see that happening I will be pointing it out to the seller and buying elsewhere if I can.

    It is bad enough it having to go up without people profiteering out of it.

  13. Tigra 07 Silver badge

    This might seem to simple for big companies with large profits

    "Retail analysts have warned that the real impact of this is likely to be price rises of between five and eight per cent as shops round up prices."

    Shouldn't they start at 3% then?

    Or just do what we do and stick the price of just the VAT on and nothing extra

  14. Alex Brett

    Re: >only affects small business?

    Assuming you're VAT registered, then it all depends on who your customers are, if you are a B2B supplier, then your customers are likely VAT registered anyway, and hence the change only makes a cashflow difference to them, as they're going to claim the VAT they've paid back anyway, thus not a big deal - no change to your profit margins as you claim back the increased VAT from your suppliers etc.

    For a B2C supplier, or supply very small businesses that aren't VAT registered themselves then it's more tricky as at that point your customers likely care about the 'including VAT' price rather than the excluding, so your goods will have just become ~2.1% more expensive to them, unless you swallow the rise in which case your profit margin decreases obviously.

    If you're not VAT registered at all then your costs will likely have increased ~2.1%, so you have to decide whether to pass that on etc, and at that point it can have an effect on your profit margin. Note that most fixed costs like energy bills etc are either not VATable at all, or charged at the reduced rate which is unchanged at 5%, so there is little change there.

  15. Anonymous Coward

    Temporary Tax (oxymoron)

    This will doubtless be like that other temporary tax introduced for the duration of the emergancy.

    Income Tax, for the Napoleonic Wars

  16. Bluenose

    Permanent increase of £13 billion to the Govt

    and when the debt is all paid off, £13 billion is a pretty big rise in MP expenses, pay and I suppose their pensions as well.

    The upside is the Tories will offer us all a little bit off our income tax or freeze the council tax for a couple of weeks as a sweetner to vote for them at the next election. Of course such offers will still not equal the extra £13 billion the Govt is receiving.

    By the way I wonder what Asda are getting in exchange for their participation in the live/eat healthy voucher campaign? Oh that's right you can only use the vouchers at their stores. Archie Norman will be pleased with the increased Wal-Mart profits.

    1. Anonymous Coward

      It certainly will

      "and when the debt is all paid off, £13 billion is a pretty big rise in MP expenses, pay and I suppose their pensions as well."

      Yup. Assuming 650 MPs, that's a cool £20M each, per annum.

    2. Greg J Preece

      When the debt has all been paid off

      Ha! When was the last time we, as a country, were not in debt?

      1. chr0m4t1c

        @Greg J Preece

        1694 after the Nine Years War was the start of national debt, so it would be then I guess.

        We got quite close to paying it off in 1914 when I understand that there was some sort of contretemps over the assassination of someone's pet duck (or something).

        Currently we're on track to owe £1tn sometime this year - that's £1million-million.

        The extra £13bn will help, but it's still going to take something like 15 years.

        We *ought* to be grown-up and sensible about this and agree to pay it all off but what will probably happen is in a year or so when the global economy starts looking a bit rosier, then international equivalent of Ocean Finance will offer to consolidate all of our debts into one easy monthly payment and we'll vote for whichever party says they'll take them up on the offer because it'll mean a pint costs 5p less.

        And it'll start all over again.

  17. Anonymous Coward


    And will the £13 billion tax increase actually benefit the general public, like fixing all the potholes that are still around from a year ago?

    Will it fuck.

  18. Anonymous Coward

    Problem solved!!!!

    Legalise drugs, tax licensed sellers as per tobacco and alcohol products. Serious addicts get it on prescription, not free but at a reasonable price

    Achieve an economic miracle. Lots of lovely tax rolling in, the middlemen crims cut out, crime reduced as addicts don't have to resort to crime to pay for their habit, police resources freed up to concentrate on real crime, like speeding drivers - LOL.

    I say joke alert, but I would consider this approach seriously for all the above reasons and especially because making it illegal just doesn't work.

    Did it ever stop anyone from using?

    I propose that he government cease passing pointless legislation which caters only for idiots and usually inconveniences only those who obey the law, accept that these people exist, in all their myriad forms, and simply manage the situation.

    Concentrate on that legislation that actually makes a difference rather than making it look like you are doing something about a problem that can be managed in better ways than making it illegal.

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