VAT Increase?

[The Natural Philosopher]

Not by small businesses who are not VAT registered.

Mmm.

>

[Steve Firth]

The price of cooking oil. And the oil that was used was rapeseed and burning that is about all that it is good for.

[Lobster]

Like apparently chocolate-covered biscuits, as opposed to chocolate-chip cookies... (!)

David

[Dave Liquorice]

But remember things that are "essential" like food and domestic fuel have not changed their VAT rate of 0% and 5% respectively.

Road fuel is a bit of a beggar though (diesel):

14 Nov 2010 114.9 23 Nov 2010 121.9 +7.0 10 Dec 2010 124.9 +10.0 18 Dec 2010 125.9 +11.0 26 Dec 2010 126.9 +12.0 03 Jan 2011 127.9 +13.0 08 Jan 2011 129.9 +15.0

Aug/Sep/Oct/Nov had prices very close to 114.9.

[Dave Liquorice]

No VAT on meat anyway...

[Dave Liquorice]

More fool them then. You don't *have* to have a turnover in excess of the threshold, that is when you *must* register.

With Cash Accounting and the Fixed Rate Scheme "doing the VAT" is very simple. Though if in the FRS it is best to still track VAT properly to make sure that you aren't giving HMR&C any more than you have to.

[The Natural Philosopher]

Indeed, BUT if the majority of your saleable product is your value add, then you can still offer a cheaper service by not registering.

[John Rumm]

Seems unlikely. How well did it work the other way? i.e. when there was a reduction to 15% did it really encourage anyone to spend more?

[Mark]

It will add to the overall inflation figures which does effect the economy as a whole.

[tim....]

[Man at B&Q]

Why?

It's largely cancelled out by the previous rise (from 15 to 17.5%) dropping out of the inflation calculation.

MBQ

[Adrian]

"Man at B&Q" gurgled happily, sounding much like they were saying:

Probably because that was in 1991.

The basic rate of VAT didn't change from then until this month. Sure, there was a temporary reduction the other year, but that was only ever intended as a temporary stimulus. At which it failed miserably.

[Mark]

It doesn't cancel this out. It does prevent the inflation figures stabilising since the 15 -> 17.5% rise was over a year ago.

[Man at B&Q]

Which planet are you on?

MBQ

[Man at B&Q]

Yes it does. If VAT had remained the same then inflation would have decreased due to the rise 12 months ago dropping out of the calculation. VAT has increased again this year so, other things being equal, the inflation rate remains roughly the same.

That's exactly what it does, rather than cause the inflation rate to increase as some seem to think.

The problem is that some retailers are pushing through other price rises at the same time and trying to blame the VAT increase.

By about 10 days, yes.

MBQ

[Adrian]

"Man at B&Q" gurgled happily, sounding much like they were saying:

Planet reality.

As you'd know if you bothered to read the para you snipped when you replied.

VAT was introduced in the early/mid 70s, at 8%, went up to 15% in 1979, then up to 17.5% in 1991 - where it stayed (temporary stimulus excepted) until this month.

[Nightjar]

It will only affect the inflation because of the way the Consumer Price Index works. Changes in indirect taxation always affect the CPI. Even then with food (zero rated) and house fuel (lower rate) being significant factors in the CPI, the rise will not be directly proportional to the rise in VAT. The underlying rate of inflation, the CPIY, will not change as a result of the increase in VAT.

What will affect the economy is not a short-term apparent rise in inflation but whether the rise changes consumer buying habits. If, as I suspect, the increase is not enough to produce a long term reduction in spending, it will have very little effect on the economy.

Colin Bignell

[Man at B&Q]

Temporary stimulus or reduction followed by increase? We'll have to agree to disagree.

MBQ

[Dave]

I have created a new saying...

If it has VAT on it, I am cutting back on it.

Dave

[Dave Liquorice]

Economy as in the amount of money circulating rather than some accountants wet dream about how the country is fairing in a global sense?

I agree there might be short term drop in spending but things will still wear out and need replacing, and extra fiver on a =A3250 washing machine is hardly worth worrying about, where you buy it will have a bigger affect on the price.

So all that happens is that HMG get a bigger slice of the circulating money. Which is what they want.