Car park charges and VAT

[PhilipW]

It will be interesting to see if train companies reduce their car park charges now that VAT has been reduced. Some how I think not.

For example at Southampton Parkway, SWT should reduce the charge from an already extortionate £9.00 to £8.80.

If they don't reduce the charges I hope they get a bad press.

 

[DaveNewcastle]

Good point!
There's going to be masses of examples like this though. . . .
Retaillers will be obliged to reduce the rate of VAT that they charge next week - no choice in the matter - but its entirely up to them whether to reduce the price to their customers or to leave the price unchanged and increase their margin. I'm VAT registered and haven't received the written notice yet (obviously!), but I know that the Treasury believes that the benefit of today's VAT announcement will work for the nation's economy either way. If the retail prices are reduced by 2.5% then consumers will have that little bit more to spend elsewhere (and we all will, won't we?), and if prices remain unchanged, then retaillers have 2.5% more to spend on their costs (which includes employment of course - and they will spend it too) and the one thing the government will NOT want is more unemployment.

BTW There's already an anomaly in charging VAT on car parking: Assuming an authority charges in round numbers (such as £1 per hour), then they will have to pay the gov't the 15% VAT for all income from those tickets for parking in their car parks; BUT, they can pocket that 15% from the same rate ticket for parking on metered bays on their roads. (VAT cannot be charged for parking on the highway).

I won't go on about it now, but for once, despite all the critical press which has had 3 days to research and prepare for this, I believe the Treasury has got it right! The small VAT reduction will make the country's many poor people spend more very quickly, and make the wealthier re-invest in the markets - winning either way.

 

[Bighat]

Good point!
There's going to be masses of examples like this though. . . .
Retaillers will be obliged to reduce the rate of VAT that they charge next week - no choice in the matter - but its entirely up to them whether to reduce the price to their customers or to leave the price unchanged and increase their margin. I'm VAT registered and haven't received the written notice yet (obviously!), but I know that the Treasury believes that the benefit of today's VAT announcement will work for the nation's economy either way. If the retail prices are reduced by 2.5% then consumers will have that little bit more to spend elsewhere (and we all will, won't we?), and if prices remain unchanged, then retaillers have 2.5% more to spend on their costs (which includes employment of course - and they will spend it too) and the one thing the government will NOT want is more unemployment.

BTW There's already an anomaly in charging VAT on car parking: Assuming an authority charges in round numbers (such as £1 per hour), then they will have to pay the gov't the 15% VAT for all income from those tickets for parking in their car parks; BUT, they can pocket that 15% from the same rate ticket for parking on metered bays on their roads. (VAT cannot be charged for parking on the highway).

I won't go on about it now, but for once, despite all the critical press which has had 3 days to research and prepare for this, I believe the Treasury has got it right! The small VAT reduction will make the country's many poor people spend more very quickly, and make the wealthier re-invest in the markets - winning either way.

VAT charged for 'services' can and should be reduced from the date (Monday 1 December?) it is implimented.

However, for 'product', sellers may have brought goods prior to that date, and VAT will be levied at the old rate. He then faces a choice, be stuck with overpriced stock, or take a loss.

This could be considerable on 'big ticket' items.

 

[paul1609]

I was shopping in Chichester this afternoon. I noticed several retailers advertising VAT reduced price available now- no need to wait to Monday included PC World.

 

[Mojo]

Is a 2.13% discount really going to have that much effect? I can't imagine large retailers reprinting hundreds of thousands of stock labels on the products they sell on which VAT applies.

For the more "luxury" products, many retailers are having double-digit percentage reductions already...

 

[LTJ87]

However, for 'product', sellers may have brought goods prior to that date, and VAT will be levied at the old rate. He then faces a choice, be stuck with overpriced stock, or take a loss.

This could be considerable on 'big ticket' items.

I can't make sense of that statement.

If a retailer has bought goods before the change in rate at 17.5% and they sell it after the change in rate, they will charge and pay VAT of 15% to HM Revenue & Customs. The rate of VAT due is that at the time the goods are sold, not the rate of VAT paid on purchase of the stock.

The real problem for sellers of big ticket items is that since the rate change was announced, customers have been holding off purchases until the VAT rate goes down, thus reducing sales and cashflow for this week.

 

[DaveNewcastle]

If a retailer has bought goods before the change in rate at 17.5% and they sell it after the change in rate, they will charge and pay VAT of 15% to HM Revenue & Customs. The rate of VAT due is that at the time the goods are sold, not the rate of VAT paid on purchase of the stock.

Quite correct! Retaillers do NOT make a loss by selling goods at 15%VAT after having bought them at 17.5%VAT. They claim back the 17.5% from HM R&C and pay the 15% to HM R&C so their profit (or loss) is simply based on the difference between the price they bought it for (without VAT) and the price they sell it for (without VAT). Just as before the change.

The real problem for sellers of big ticket items is that since the rate change was announced, customers have been holding off purchases until the VAT rate goes down, thus reducing sales and cashflow for this week.

Yes, and retaillers have announced severe cuts in income this week! To reduce this effect, some will have been disounting, which is exactly what Paul1609 has noticed. But although they might advertise that they are selling at the new 15% now, in fact they cannot. It is just a phrase to promote a short term discount - they will have to be selling at a lower net price, properly called a discount or at a lower profit or even at a loss (just to get some income).

The guidance note from HM R&C which advises the change in rate also explains that the date used to determine the VAT rate charged is not the date of the invoice but the date of the supply. This prevents a seller from saying "take this now and I'll give you an invoice for it next week at the lower rate".

To return to the OPs point . . . .
It is clear that the lower 15% rate must be applied from Monday. But there is no compulsion for a retailler to reduce their price; they can keep the price unchanged and simply pocket the 2.5% VAT which they don't have to pass on to the consumer. In the case of machines which operate in convenient round figures (eg £1 for 1 hour parking) then we really can't expect any change.

 

[spoony]

I work for a major software house that produces accountancy packages and to me this change makes no sense at all. A buisness that was charged 17.5% VAT can claim it back as long as they are VAT registered. A business that is not will simply leave the prices the same so as not to take a 2.5% loss. Therefore its only the actual end consumer (ie us in the shops) that should in theory see a reduction in prices. But lets be honest, is any retailer really going to lower their prices on everyday goods? Why should they, after all we have already paid the higher prices so retailers will assume that we can afford and will pay the higher prices.

Another point is that for every £100 Net spent we will save £2.50. Now I dont know about you but if im going to spend £100 the chance to save £2.50 while still being welcome is never going to be a deal breaker In short this move is a cheap political stunt that will backfire in the long run and is causing most businesses I have spoken to more hassle than its worth.

Anyway getting back on trackIn response to the OP, I dont think the reduction will make any significant changes in price including car park charges

 

[Craig]

Another point is that for every £100 Net spent we will save £2.50.

You don't even save that much.

If the amount including VAT is £100 you divide by 1.175 to get the price excluding VAT (100/1.175 = 85.11). Then multiply by 1.15 to get the amount including the new VAT rate (85.11 * 1.15 = 97.88). So in reality you only save £2.12 as Mojo stated earlier.

 

[Tom B]

Another point is that for every £100 Net spent we will save £2.50.

As Craig points out it's not that simple... quite shocking how many people are going round saying that, though.

 

[P156KWJ]

tbh I can't be bothered spending about 35p on a stamp to send SWT a letter to get 20p back

 

[markusgl1]

Quite correct! Retaillers do NOT make a loss by selling goods at 15%VAT after having bought them at 17.5%VAT. They claim back the 17.5% from HM R&C and pay the 15% to HM R&C so their profit (or loss) is simply based on the difference between the price they bought it for (without VAT) and the price they sell it for (without VAT). Just as before the change.


Yes, and retaillers have announced severe cuts in income this week! To reduce this effect, some will have been disounting, which is exactly what Paul1609 has noticed. But although they might advertise that they are selling at the new 15% now, in fact they cannot. It is just a phrase to promote a short term discount - they will have to be selling at a lower net price, properly called a discount or at a lower profit or even at a loss (just to get some income).

The guidance note from HM R&C which advises the change in rate also explains that the date used to determine the VAT rate charged is not the date of the invoice but the date of the supply. This prevents a seller from saying "take this now and I'll give you an invoice for it next week at the lower rate".

To return to the OPs point . . . .
It is clear that the lower 15% rate must be applied from Monday. But there is no compulsion for a retailler to reduce their price; they can keep the price unchanged and simply pocket the 2.5% VAT which they don't have to pass on to the consumer. In the case of machines which operate in convenient round figures (eg £1 for 1 hour parking) then we really can't expect any change.

we have been told that we have to reduce our prices we charge from monday. Our It dept have had a nightmare trying to get our systems ready, they have not only had to change the prices on the screen but have had to write a progam where if some one returns something brought last week they get refunded with vat at 17.5% and not 15

 

[spoony]

As Craig points out it's not that simple... quite shocking how many people are going round saying that, though.

Ok, point taken. I still doubt many people will be persuaded to spend on the basis of saving a few pence.
--- old post above --- --- new post below ---

we have been told that we have to reduce our prices we charge from monday. Our It dept have had a nightmare trying to get our systems ready, they have not only had to change the prices on the screen but have had to write a progam where if some one returns something brought last week they get refunded with vat at 17.5% and not 15

Just wait till the VAT returns are due. Were expecting all sorts of fun and games due to people not processing their accounts correctly. Another point is regarding notional vat element of the the VAT return for EC sales and purchases, HMRC still havent told us if they want this changing. Not that it really matters as the net effect on the return is nil.

 

[me123]

As Craig points out it's not that simple... quite shocking how many people are going round saying that, though.

IIRC, most things are going to be cheaper in the short term. But there's a lot more taxes coming in that'll make up the difference! Booze and fags are already virtually exempt from this vat reduction.

 

[djw1981]

You also have to bear in mind that a retailer does not pay 17.5% of the total cost to the HMRC, but (IIRC) 10%

 

[Pumbaa]

Just wait till the VAT returns are due. Were expecting all sorts of fun and games due to people not processing their accounts correctly. Another point is regarding notional vat element of the the VAT return for EC sales and purchases, HMRC still havent told us if they want this changing. Not that it really matters as the net effect on the return is nil.

Oh joisus. I completely forgot about that. I've spent most of the weekend redoing most of our system to cope with the new rate, and completely close accounts prior to tomorrow, and just replicate them to start afresh.

Annoyingly, we fixed half our prices to be 'friendly' with VAT at 17.5%, with this reduction now its all a bit messy.

We've concluded that most of our products will remain at the same price, we will just have the extra 2.12 as profit.

 

[Tom B]

We've concluded that most of our products will remain at the same price, we will just have the extra 2.12 as profit.

I suspect that many companies will do this - increase the price of the product outwith VAT enough such that the price the customer pays remains the same.

 

[Craig]

Booze and fags are already virtually exempt from this vat reduction.

IIRC the duty on these and fuel is being increased to compensate, so they'll effectively remain at the same prices.

 

[Craig]

I suspect that many companies will do this - increase the price of the product outwith VAT enough such that the price the customer pays remains the same.

So far I've found that the bigger shops with computerised systems (Tesco etc.) haven't changed their price tags but are charging the lower VAT rate when you pay. I can't see smaller retailers with manual checkouts doing this though.

Still, I saved a massive 26p on some screen wash and a couple of other bits today

 

[P156KWJ]

Boots are practically raving about it on their reciepts saying "GET YOUR PRICES AT LOWER VAT RATES NOW!!!" hock:

 

[Craig]

The whole point of the cut is to encourage people to spend (look up fiscal policy), so it makes sense for shops to advertise the fact their prices have been lowered.

 

[P156KWJ]

well, yeah, but 3 exclamation marks?!

 

[spoony]

A lot of retailers I have spoked too have just increased their net prices

 

[Craig]

well, yeah, but 3 exclamation marks?!

But you save 21p for every £10 that you spent!!!!1!!

 

[Golden Gripper]

Some shops, M&S among them, are offering a 2.5% or 3% discount to save having to re-ticket everything. However, the cut in VAT is 2.5 percentage points, not quite the same thing, but a lot of people are being taken in, including the BBC.

After all, if most people didn't understand why the new millenium started on 1 January 2001, not 2000, how are they going to understand the difference between a percentage and a percentage point.

 

[466.networkers]

Care to explain the differences?

 

[Mojo]

Care to explain the differences?

As mentioned above, by myself and Craig.

A product that previously cost £100 would have actually cost £85.11. Therefore with 15% VAT it will now cost £97.88.

 

[me123]

I don't like the reduced VAT: it just means that I've got more change

 

[466.networkers]

And the price of larger items now end in weird numbers such as 6 and 3!
For example, a £169 Xbox 360 is now £166! What's the point of saving £3 (well, now I think about it, that's a pint! )

 

[spoony]

And the price of larger items now end in weird numbers such as 6 and 3!
For example, a £169 Xbox 360 is now £166! What's the point of saving £3 (well, now I think about it, that's a pint! )

Pity you wont save on a pint