UK VAT Reduced Rates - Retailers, you could be losing out!
Most people are now aware that here in the UK the VAT rates were reduced in December from 17.5% to 15% in 2008 to help consumers combat the credit crunch. However as a retailer you could be losing out on thousands of pounds in lost revenue this year if you’ve incorrectly set-up the reduction on your e-commerce site. Let me explain:
Some retailers are simply applying the reduced rate to the shopping basket by applying a 2.5% discount to the total value. It seems right to do this, but many fail to realise that this is actually a reduction on the original VAT rate as well as the product value.
Wrong:
I go to buy an Apple iPod Touch (32GB) which retails at £269.98. At the basket the 2.5% discount is applied and I only pay £263.23. I save £6.95, wahoo!
This is great for the consumer but bad for the retailer;
Right:
The same iPod Touch is worth £229.78 to the retailer + 15% VAT which means the actual RRP is £264.25.
Now that’s a difference of £1.02 in lost revenue! It may not seem like much but this VAT reduction is in place for the whole of 2009, so that lost revenue will quickly add up.
Times are hard enough as they are, don’t make it even harder than it needs to be!
