20% VAT wow!

Something costing 100 pounds with VAT at 17.5% might go up to 102.13 with VAT at 20%

For anyone who buys 'extra' on a credit card, to 'save money' I suspect the interest rate (at perhaps 2% per month on outstanding balance) would wipe out any savings. 2.5% is not a massive rise, in my view, and while there may be some knock-on effects (such as insurance, maintenance, and fuel cost rises for deliveries) food items won't go up and I suspect that the bigger stores will reduce their profit margin a little to absorb the increases for a good few months if not the whole of 2011.

If the Co-Op and others can sell a 70cl bottle of Baileys at 9.99 instead of 13-odd pounds one has to ask why they don't sell those bottles at 11 or 12 pounds the rest of the year!

And given that most people tighten their belts in the post-Christmas Jan/Feb when-the-credit-card-bills-come-in period anyway the VAT rise will really only be felt come March 2011. If the OP's customers are trying to dodge paying VAT with cash-in-hand I'd suspect they'd attempt the same thing whether it was 15%, 17.5% or 20%.

I complained about the VAT rise to a Belgian colleague yesterday and he was very unsympathetic because in Belgium VAT is already 21%... and it's 6% on food.

I think it might create something of a run on consumption. If you know prices are going up you're more inclined to bring the purchase forward. So make hay whilst the sun shines in the second half of 2010

Perhaps psychologically, there may be a few thinking how much more it is (the way so many shops do the really daft 9.99 or say "under 10 pounds" which is true, but so insignificantly different as to be pretty much a whacking great lie)...

I know there was the possibility of the 15% vs 17.5% making some difference, but the bulk of the difference was to shops having to mess with the prices in databases and on web sites. So it will be with the increase, though at least this will make changing 'exc VAT' to 'inc VAT' a darn sight easier to do in your head!

I had heard 21% being rumoured. For run-of-the-mill things I don't see it being a problem - it's only when products or services go past several hundred pounds the change will be most noticeable and may encourage avoidance.

Can see that customers may want to avoid it but you presumably do quotes, so maybe you'll have to come up with a fib like your accountant has warned there may be spot checks - for every quote you've sent out, the recipient may be asked to provide details of who got the work and how much was paid. If you got their custom, then it would be easy to determine if VAT of a suitable amount went to HMRC, and you don't want to appear in court...

HMRC could legitimately do this (and since tax evasion is commented on frequently, not too impossible to be true, though staff numbers and time available might make it impossible in practice unless they had a 'hot tip'). Both sides would be in trouble if anything went on without VAT being collected (so that might make customers think twice about asking anyone else to do it, too)!