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VAT: Retail Trade

Volume 493: debated on Tuesday 2 June 2009

To ask the Chancellor of the Exchequer (1) what assessment his Department has made of the likely effect on retail businesses of the proposed change in the rate of value added tax in January 2010; (277316)

(2) what recent discussions his Department has had with retailers on changes to value added tax rates; and what the outcomes of those discussions were.

An assessment of the impact of the temporary reduction in the VAT standard rate, including the impact of returning the rate to 17.5 per cent., was published when the reduction was announced in November 2008 and is available at:

http://www.hm-treasury.gov.uk/d/pbr08_vat_1845.pdf

Treasury Ministers and officials have since met with representatives from the retail sector on a number of occasions to discuss the temporary reduction in the VAT standard rate. Budget 2009 confirmed that the rate will return to 17.5 per cent. from 1 January 2010, allowing businesses to plan with certainty for that date.

HM Revenue and Customs (HMRC) will continue to discuss with retail and other businesses the practical issues associated with the change. To address the particular difficulties for businesses such as pubs and clubs that will remain open beyond midnight on 31 December, HMRC will allow a few hours' grace in which they may continue charging the 15 per cent. rate for a session that goes into the early hours of 1 January.