Following the chancellors statement yesterday most would have been pleased by the reduction in the VAT rate from 20% to 5% until January 12th 2021.
It has taken a little while to grasp what this really means to many businesses. Those that will benefit the most are the larger turnover shops that pay the most VAT. We have many clients with bigger turnover shops and some with multiple shops. Take as an example a shop taking £12,000 per week, they will be paying VAT of about £2000 per week, this will reduce to £500 per week giving them a £1500 per week increase in profit, a substantial sum.
There has been some discussion as to whether any of this should be passed on to the customer, the overwhelming opinion is that it should not. If customers ask the answer should be this is a benefit the chancellor has given to businesses and their staff to compensate for the loss of earning when shops were forced to closed, this is to help make up those losses.