20% VAT wow!

[bacon]

Didnt think this would happen.

With running our own business more people will want to pay cash for jobs to avoid this tax - going to be a battle as need the money to go throu the business.

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)!

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 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

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.

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!

It's the food it hurts on here Chil; and I don't buy clothes or books out here because they are so expensive.

I bought a 1.4 kg chicken (large by Belgian standards) in Carrefour on Monday, and it was 9 euro 50. I walk round Waitrose when I'm home, marvelling at the size and cost of the chickens and wishing we had a freezer in the car so I could take some home with me!

scary - the cost of food here is indeed painful. I look at these "feed your family for 30 quid a week" threads and feel slightly faint!

VAT is 21% in Belgium I believe!

21% on non-food and 6% on some food - if you ever shop at Colryut it tells you on the bill.

I wish I could persuade ds to like tuna....

I think they think I'm strange in Carrefour - if there's a reduced chicken there, I'll buy two and freeze them!

Taking the VAT from 17.5 to 20% may not seem a small jump, the main difference is it is going to hit EVERYONE wheras the N.I rise would have only affected those earning over £22,000 thus preotecting those on a low income. Said it before i'll say it again...The CONservatives...defending the super rich and attacking the poor since 1678.

Hey all these people saying ah its not that bad its only X amount extra..ok....lets just raise it to 30%..hey..it wont matter.

Define 'super rich' please. Some might argue that £22,000 is a low income as well. The NI rise would not have raised enough to reduce the deficit built up over the past 13 years, hence the VAT rise.

It hits everyone, and it can be avoided as it not there on children's clothes or shoes, or on none luxury foodstuffs.

I was bored with you before the election Lisa; you are still boring now. Either make your point in an adult fashion (remembering that those who post here do have brains), and that we don't need the capital letters. We understand that you work for, or are affiliated with, the Opposition and don't like the Government.

Where are the big businesses now attacking Labour before the election?! Don't they think increasing VAT will harm consumption, therefore their revenues? Or are they just too happy with their peerages... [disgusted]

totally agree ginger and lisa. hope the libdems are proud of their disgusting sell out.

Proud to be doing something about the economic situation. Not proud of all the items in the budget, though.

investment not cuts is the answer. cuts means less jobs means less people with enough money to spend which means businesses go bust which means more people unemployed which means and on and on we go. we have seen this before from the thatcherites - rich people got extremely rich, poor people even poorer, massive increases in crime and unemployment, we had JUST started to see a redressing of this - though I know the gap between rich and poor widened, the people at the bottom were nonetheless being raised up - and now the Torydems are here to ConDem the nation! well - we get the government we vote for and i hope everyone who voted tory and libdem will be happy with this over the next however long it lasts, but i know there will be plenty of people without enough money to get by who are really really going to suffer.

fathersday, would the UK really emerge from a recession just like that in the knowledge that it still has that sort of deficit hanging over it? and growth would then be enough to reduce the humungous deficit all by itself? It has to be tackled.

better that than massive unemployment and all round doom.

but it wouldn't happen, would it (the deficit reduction, I mean). you can't reduce that sort of deficit just through ordinary growth. The interest payments would just get worse and worse and worse.

"the main difference is it is going to hit EVERYONE"

VAT is a tax on consumption and as such affects those on low incomes disproportionately if they are big consumers. But those on low incomes are also being protected from wage-freezes, they're getting extra on the CTC, more personal tax allowance (not available to better-off people), they're not paying more in NI and income tax ... and this goes some way to offsetting the imbalance.

For example, many people on these forums have checked the budget calculators and found that they will be prima facie better off in terms of tax, NI and CTC. The middle-high income earners are worse off with that initial calculation ... and then they have to pay the extra VAT on top in addition.

So it's a bit of a dumb-down to say the coalition are attacking the poor and protecting the super wealthy... and it's also not borne out by the numbers.

"now the Torydems are here to ConDem the nation!"

A pat phrase doesn't make an argument. The 'people at the bottom' as you patronisingly put it were not being raised up. They were being held down, trapped in a cycle of welfare dependency, poor educational opportunities and low social mobility. It was the Labour party that blithely lowered CTG to 18% enabling thousands of super-wealthy people to dodge paying income tax at the proper rate whilst at the same time abolishing the 10% tax band without thinking it through. Not surprising from an ex-Chancellor/PM that was so uncomfortable with ordinary working-class people that he called them 'bigoted' when he thought no-one was listening.

If you 'know' that the gap between rich and poor widened over the last 13 years then you also 'know' that the Labour government failed the people it claimed to want to help the most. They were exposed as fakes. We certainly did get the government we voted for and, to borrow another pat phrase,it was 'ABL'.... 'Anyone But Labour'

I am happy that someone is at last doing something about the deficit, and I think we have to take the long view.

It is no good spouting about investment - there was nothing left to invest with. The welfare state is out of control; the public sector is bloated, and I say that as an ex public sector worker, and one whose husband is public sector too.

If this had all been done by tax rises, then those who create wealth would choose to move away. Those who pay 40% tax will also have an NI increase next year and pay more in VAT, and as Chil says they don't benefit from the increased tax threshold, as the higher rate threshold has been lowered to ensure that they don't.

I'm waiting for the other boot to fall for us, with the public sector pension review and the SDSR; dh may not have a job in 6 months; however, it could not carry on as it was.

I read the other day that in reality these cuts are only 5% on top of what Labour would have made had they stayed in power anyway, so go figure. One way or another, we were going to pay.