Realistically cutting VAT by this amount makes only 2% reduction to the retail (or VAT inclusive) price of something.

you seem to forget that VAT is a tax on buying, collected by the seller on behalf of the revenue and customs, NOT a tax on the seller.

this means that something that retails for £10 effectively costs £8.50 and contains £1.50 VAT, the reduction means it still costs £8.50 but now contains £1.30 VAT

No difference to the retailers, appart from huge costs of passing the reduction on. With retailers already offering reductions of 20% and sometimes 40% it is a neligible reduction.

This is going to cost in excess of £12billion, it surely would have been better for the government to underwrite an insurance on B2B credit sales (as have the French government) and therefore keep the wheels of commerce turning.

What I am seeing at the moment is business who supply on credit terms having credit control issues (not getting paid) and therefore they are unwilling to take on new business unless it is cash with order.

Very few businesses can actually pay cash with order to all suppliers, and it itself contains risks, what if the supplier goes bust before they deliver the goods? You've paid your money and got nothing.

Old:
Pumber does £100k net work +vat (£17.5k)
uses parts £10k net + vat (£1.75K paid through wholesaler)
pays to VAT directly £15.75k
total profit £90k total vat £17.5k

New:
Pumber does £100k net work +vat (£15k)
uses parts £10k net + vat (£1.5K paid through wholesaler)
pays to VAT directly £13.5k
total profit £90k total vat £15k

This has made no difference to the plumber UNLESS he does not pass on the VAT reduction, but the chancelor urges him pass the reduction on to customers

like the idea of cashback from the tax man though

I'm just surprised that a Tory will claim that lowering of VAT has no other effect than annoying retailers in relabeling price tags on goods…

So are you suggesting we should raise VAT to 20% instead? If a 2.5% decrease has no impact, it must be the same for a 2.5$ increase?

reply: No, I am not proposing that. A 2.5% decrease will have little impact for the reasons I have set out, but tax increases in this climate would be another reason to put off buying.

"Hornby" the model rail, Scalectrix and other Model line makers were about to increase their prices, this has now been cancelled to April '09 and the VAT reduction will cover it instead.

The Government are going to get less receipts from business but by the sounds of it not being passed on. The likes of Debenhams, BHS etc say they are running 20% – 30% sales anyway so the VAT reduction would make no noticeable difference.

Builders and Plumbers have also indicated on interviews on News programs that it will not be passed on, due to time and extra costs for them involved.

Who on the 1st December will start the VAT cuts so that others follow?
Not the small shops thats for sure.

Anyone know what happened when VAT went up from 15% to 17.5%? Did the reverse of what Darling is hoping for now happen then?

Questions must surely be asked of the government's advisors role in this VAT change. Did they consider for one moment that almost every company in the country will have to instruct computer companies to change every single item to reflect the change in VAT . It will be a nightmare to all of the small mail order companies who are going to be wholly dependant on this coming week's orders in the run up to Christmas. Are they expected to re-print catalogues?? What about companies like Amazon and Argos !!! The list is endless.

With small businesses already struggling financially, these additional costs (which have not been budgeted for), could lead to the companies collapsing.

Our business runs a website called: http://www.bailiffadviceonline.co.uk which offers advice to the public if they are faced with a visit from a bailiff.

To date we have probably dealt with around 6,000 queries and until the last couple of months, we only ever received enquiries from the public concerning unpaid council tax and unpaid parking tickets.

However, it is STAGGERING that in the past 2 months EVERY OTHER query is from a small or medium sized business who are unable to pay their Business Rates and they now have a bailiff threatening to remove all of their assets and thereby their ability to trade out of this recession. Just today we have had enquiries from a hairdressers, 4 restaurants, a garden centre, garage, and 3 public houses !!

A little unknown fact is that last year local councils obtained over 3 MILLION Magistrate Court Summonses against individuals and businesses for arrears of Council Tax and Business Rates !!

With the severe effects of the recession this figure will certainly increase and frankly the amount of money that the government is paying for this VAT change would have been far better spent in freezing council tax and withholding enforcement against vulnerable non payers and small businesses.

PS: Sorry for the long post….

The recovery will be led by web designers changing the VAT on every web site selling to the UK, and printers reprinting stationary with the new VAT rate.

Just as soon as every business has updated everything, they'll change the VAT rate back to 17.5% and all those web designers and printers will have another glut of work to do.

Seriously though, in effect if businesses dont pass this cut on, then they effectively increase their margin, and therefore profit, which would work the same as cutting any other tax effecting businesses.

But for those who cant pay the mortgage and the bank wants the overdraft paid off by Wednesday it will be no help at all.

Basically a pathetic attempt and a no loose situation for labour, if it works they get all the glory and another term, if it goes wrong they get to blame the conservativs for huge tax rises in the next parliament

If you really want to make the poor better off, lower tax on alcohol and cigarettes (an unfortunately high proportion of their expenditure).

An even better idea would be to raise the tax threshold of the poor.