Chancellor lets down retailers on VAT

Chancellor Alistair Darling has ignored calls for a delay in the reinstatement of the 17.5% VAT rate to ease the strain on retailers over the Christmas period.

In today’s Pre-Budget Report, Darling confirmed that VAT will return to 17.5% on January 1 having been reduced to 15% in November 2008.

The Association of Convenience Stores said the Chancellor had let down local shops, and that retailers were “exceptionally disappointed” by the decision not to extend the 15% VAT rate beyond January 1.

ACS chief execuitve James Lowman said: “The date of the increase does not give retailers adequate time to implement the changes over the holiday period and piles a major bureaucratic burden on retailers in what is the busiest time of the year.

“The immediate cost of the change will exceed £8 million across the convenience sector industry.”

The temporary reduction in VAT was accompanied by an increase in excise duty of 8% for wine and 4% for spirits. The Chancellor also confirmed that these duty increases will remain in place despite widespread calls for them to be rescinded once VAT returns to 17.5%.

Jeremy Beadles, chief executive of the WSTA, said: “Today’s confirmation that these tax increases will remain in place is disappointing for the trade and the millions of British consumers they serve, though sadly it is not surprising given the state of public finances.

“This means that since last year’s Budget excise duty has gone up by around 20% for wine and 16% for spirits - excessive increases at a time when most families are feeling the pinch.”