Vat Reduction Is Not Helping

[Oddfellow]

Historically, when VAT has been tampered with by the chancellor for specific things, for limited time scales, it has caused businesses more trouble than it's worth. We had similar problems in the financial crash where there was a temporary reduction to VAT which caused retail businesses in particular many problems, specifically with labelling and so on,. 

This latest scheme is similar. 

It has created a raft of holiday customers who think they can cancel their bookings and re-book to save the VAT difference and is causing a raft of admin and support calls across the industry which has instantly become a big time burden and, as we all know, time is money. 

Creating stimulus is one thing, but I think the overall likelihood that the VAT reduction will be widely seen in retail price reductions will be minimal.

[Chelsea14Ian]

As a Chef I'm pleased  with the reduction of VAT for Hospitality.Think it will help,also the scheme for Monday Tuesday and Wednesday. The reduction in VAT doesn't apply  to booze.My business  has  been whacked  for  six,any help is welcome. 

[Oddfellow]

5 minutes ago, Chelsea14Ian said:

As a Chef I'm pleased  with the reduction of VAT for Hospitality.Think it will help,also the scheme for Monday Tuesday and Wednesday. The reduction in VAT doesn't apply  to booze.My business  has  been whacked  for  six,any help is welcome. 

I really hope these schemes work for you.

Sadly, there are many people who, like myself, will not consider eating out until the pandemic has a much tighter lid on it. A £10 per head isn't much of an incentive to put my wife or myself in a situation that might endanger us for a short-hit of enjoyment. 

I hope, for your sake, that we are in a minority.

 

[rightsaidfred]

31 minutes ago, FreedomBoatingHols said:

Historically, when VAT has been tampered with by the chancellor for specific things, for limited time scales, it has caused businesses more trouble than it's worth. We had similar problems in the financial crash where there was a temporary reduction to VAT which caused retail businesses in particular many problems, specifically with labelling and so on,. 

This latest scheme is similar. 

It has created a raft of holiday customers who think they can cancel their bookings and re-book to save the VAT difference and is causing a raft of admin and support calls across the industry which has instantly become a big time burden and, as we all know, time is money. 

Creating stimulus is one thing, but I think the overall likelihood that the VAT reduction will be widely seen in retail price reductions will be minimal.

Surely its a bit early to jump to conclusions, its easy for everyone to criticise when they don`t have to find the answers, not so easy when trying to overcome something as totally unpredictable as the current situation.

Fred

[Chelsea14Ian]

I do agree, think we're caught between  the devil  and the deep blue sea.I work in contact  catering and we have lost lots of contacts. Many of our customers are working  from home,and some of our clients are downsizing there catering. Sadly  there are very few winners.

[Oddfellow]

1 minute ago, rightsaidfred said:

Surely its a bit early to jump to conclusions, its easy for everyone to criticise when they don`t have to find the answers, not so easy when trying to overcome something as totally unpredictable as the current situation.

Fred

I am not jumping to any conclusions. I am speaking from experience that started yesterday at about 1pm (and was echoed at other boatyards and our booking agents) and of experiences the last time the Chancellor did this in the financial crash. 

 

[MotorBoater]

Yes, well, thanks for the memory AB - not !

Last time this happened I had a medium sized hardware store with around 140,000 lines. We had customers arguing for reductions across everything, even though most items carried full rate of VAT some like bags of coal had reduced rate and many had no VAT at all.

Changing that lot, knowing it would all have to be changed back again, tested our patience to the limit. I can well imagine the usual Norfolk bonhomie getting stretched a bit, temporarily of course !

I imagine everyone will think these changes are instantaneous and, of course, the only query that matters is their own.

Obviously I hope that the customers who have poured (?) out of the boatyards this week will rebook but I do wonder if this reduction will benefit the airlines and ferries more. An awful lot of people "Follow the sun".

"Eat out to help out" is of no interest to me. As an "At risk" my health comes first. £10 is hardly compensation for 10-20 years off my life, or anyone elses.

[rightsaidfred]

3 minutes ago, FreedomBoatingHols said:

I am not jumping to any conclusions. I am speaking from experience that started yesterday at about 1pm (and was echoed at other boatyards and our booking agents) and of experiences the last time the Chancellor did this in the financial crash. 

 

There will be winners and loosers whatever he did, as they say you can please some of the people some of the time you cant please all the people all of the time.

Fred

[ChrisB]

VAT reduction is far better directed at the manufacturing industry for high end priced goods.

Unfortunately we don't manufacture that much!  £4.5K off a £36K car, £15K off a £120K boat etc is noticable. 

I have never even thought of VAT when eating or holidaying.

I agree with Andy, too risky going out and mixing it. As the Police said at the weekend "Once you throw alcohol into the mix, distancing etc is out the window"

[Oddfellow]

2 minutes ago, MotorBoater said:

Yes, well, thanks for the memory AB - not !

Last time this happened I had a medium sized hardware store with around 140,000 lines. We had customers arguing for reductions across everything, even though most items carried full rate of VAT some like bags of coal had reduced rate and many had no VAT at all.

Changing that lot, knowing it would all have to be changed back again, tested our patience to the limit. I can well imagine the usual Norfolk bonhomie getting stretched a bit, temporarily of course !

I imagine everyone will think these changes are instantaneous and, of course, the only query that matters is their own.

Obviously I hope that the customers who have poured (?) out of the boatyards this week will rebook but I do wonder if this reduction will benefit the airlines and ferries more. An awful lot of people "Follow the sun".

"Eat out to help out" is of no interest to me. As an "At risk" my health comes first. £10 is hardly compensation for 10-20 years off my life, or anyone elses.

Precisely the point I tried to make. 

It must be incredibly hard for Sunak to do a great deal now. The light at the end of the covid tunnel is still distant and flickering and the handling in the UK hardly celebratory which has just deepened the economic problem and continues to erode public confidence.  

I don't know what he could have done at this stage that would have been a great deal better, but the problems are only just beginning to appear; high street closures (John Lewis today), restaurant chains virtually collapsing and more. The incentive of £1000 per employee kept on after furlough should be partially effective and Sunak seems to have a decent approach to this thus far, but we know that Furlough is ending and, in the more immediate time-frame, it changes so that companies (many of which are still not operating and earning) have to stump up more. 

The big problem will be the government's ability to react to further bad news on the economy; just what financial stimulus will really be necessary to keep millions of people in work? The long-term economic costs of high unemployment will be hugely impactful on everyone except the very well-off. 

Back to my opening point: I can't see the VAT drop being hugely beneficial. It's certainly a big burden to us right now. 

[Vaughan]

Small businesses whose annual turnover is just over the threshold for VAT registration are simply un-paid tax collectors whose slightest mistake in their accounts is immediately jumped upon and dissected in detail (at your expense) by the Customs and Excise.

Seasonal holiday businesses are especially vulnerable to "Stasi" scrutiny since they make money for 6 months and then spend it on maintenance for the next 6 months. The Government VAT machine has never been able to embrace this concept and I don't suppose it ever will.

[SwanR]

I admit to being curious as to whether if a booking has been made that falls within the time period of the reduction, does the VAT change not just automatically apply?

 I think that the measures around this and around eating out should start to build people’s confidence in being able to safely start to pick their lives back up. We had coffee out this morning for the first time. 

Could we perhaps try not to throw doom and gloom over everything? 

[MotorBoater]

7 minutes ago, SwanR said:

Could we perhaps try not to throw doom and gloom over everything? 

I'm all for seeing the best of things - while preparing for the worst !

[Chelsea14Ian]

I do think some companies  are using  furlough for there own purposes. Will.be interesting to see what they do when it comes to a end.

[Oddfellow]

14 minutes ago, SwanR said:

I admit to being curious as to whether if a booking has been made that falls within the time period of the reduction, does the VAT change not just automatically apply?

 I think that the measures around this and around eating out should start to build people’s confidence in being able to safely start to pick their lives back up. We had coffee out this morning for the first time. 

Could we perhaps try not to throw doom and gloom over everything? 

I don't know enough about these specific VAT changes as we aren't affected by them in this instance, but VAT is generally due at the tax-point, not the delivery point.

I am not sure how saving £10 per head builds confidence in public safety though. The only way we build the confidence we really need is to see sustained long-term falls in infection and worse and the news of Leicester and other outbreaks around the country and abroad (2 lockdowns in Spain, one in Australia, etc.) show us how this can spike quickly. I don't think we will see a nationwide lockdown again unless it spirals out of control and I am in agreement that the economy needs to get on it's feet too. But I am left wondering what more will be needed for this all to happen in a controlled and sustained way. I doubt the Great British Common Sense will play that much of a part...... The Great British Weather might!

 

[ChrisB]

I was going on to say before the phone called me away.

There is one other area where VAT rate reduction has a very positive effect. That is Maintenance. Be it your car service, Boat anti-fouling, or having the house painted. 

Now I do notice the VAT as I get out my card at the service reception to recover my car.

[OldBerkshireBoy]

19 minutes ago, ChrisB said:

I was going on to say before the phone called me away.

There is one other area where VAT rate reduction has a very positive effect. That is Maintenance. Be it your car service, Boat anti-fouling, or having the house painted. 

Now I do notice the VAT as I get out my card at the service reception to recover my car.

The reduction doesn`t apply to those mentioned.

[Chelsea14Ian]

Aimed at hospitality. 

[ChrisB]

It was a follow on from my previous post, I know it does not apply to those. Please read in conjuction with that post.

28 minutes ago, OldBerkshireBoy said:

The reduction doesn`t apply to those mentioned.

 

19 minutes ago, Chelsea14Ian said:

Aimed at hospitality. 

 

[ChrisB]

1 hour ago, ChrisB said:

VAT reduction is far better directed at the manufacturing industry for high end priced goods.

Unfortunately we don't manufacture that much!  £4.5K off a £36K car, £15K off a £120K boat etc is noticable. 

I have never even thought of VAT when eating or holidaying.

I agree with Andy, too risky going out and mixing it. As the Police said at the weekend "Once you throw alcohol into the mix, distancing etc is out the window"

 

53 minutes ago, ChrisB said:

I was going on to say before the phone called me away.

There is one other area where VAT rate reduction has a very positive effect. That is Maintenance. Be it your car service, Boat anti-fouling, or having the house painted. 

Now I do notice the VAT as I get out my card at the service reception to recover my car.

These should have been one post. 

[grendel]

It does strike me that the government are aiming this in the thought that prices to the customer will remain the same, but that the business will only pay the reduced VAT, thus giving the businesses a cash injection, of course we all know this wont work like that as customers will expect a reduction, and thus the businesses will be no better off (apart from their accounts departments having a much higher workload trying to balance the books.)

Ian may be able to answer this one - will the provisions bought in by the restaurants etc have the VAT lowered too? or will they still be purchasing the supplies at full VAT rate? if that is the case, then the price to the customer isnt going to drop as much as they think it should.

[Wussername]

I always thought that most food was zero rated. It is the service element which is vatable.

[FairTmiddlin]

2 hours ago, Chelsea14Ian said:

I do agree, think we're caught between  the devil  and the deep blue sea.I work in contact  catering and we have lost lots of contacts. Many of our customers are working  from home,and some of our clients are downsizing there catering. Sadly  there are very few winners.

Ian, I think this may be the norm in a lot of industries. Now that firms have found the ease that working from home for lots of their staff has been. I can foresee lots of one or two day weeks at the office rest of week WAH.

The savings on travel for lots of workers would, quite often pay for the commodities used at home to run the office. Plus more quality time with the family and less stressed workers from the commute.  

[SwanR]

15 minutes ago, grendel said:

 

It does strike me that the government are aiming this in the thought that prices to the customer will remain the same, but that the business will only pay the reduced VAT, thus giving the businesses a cash injection

 

I’m reading it in completely the opposite way. Reduce VAT so the consumer pays less, can therefore afford to buy more which boosts demand and stimulates jobs. And also increases profits for businesses to survive. 

[Poppy]

1 minute ago, SwanR said:

I’m reading it in completely the opposite way. Reduce VAT so the consumer pays less, can therefore afford to buy more which boosts demand and stimulates jobs. And also increases profits for businesses to survive. 

That's how it should work. However....