Suppliers pass on VAT cut

19 December 2008
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19 December 2008 | Jake Kanter

Nearly three-quarters of buyers say their suppliers passed on the reduction in VAT since the measure came into force.

According to the latest SM poll of 100 buyers, 72 per cent have benefited from the 2.5 percentage point cut in tax announced by the chancellor in the pre-budget report in November (News, 11 December). The remaining 28 per cent said they had not yet received the reduction from vendors.

Buyer Tim Weston said: "Rather than withhold it, most suppliers are joyfully announcing the cut as if it were a gift from them rather than the government."

Some purchasers said they had to prompt vendors into reducing VAT, while others said they would be reviewing contracts to adjust payments accordingly.

Most respondents agreed the cut would have little impact on future savings. Steve Taylor, sales manager with buying responsibilities for ornamental fish and aquarium suppliers wholesaler JMC Aquatics, said: "The savings will be relatively small compared with the special deals that can be negotiated with suppliers."

Buyers who did not report the reduction being passed on said they had not received invoices for work carried out beyond 1 December, as VAT is claimed back from suppliers. Others said their contracts track changes to VAT.

Small business lobby groups the Forum of Private Business (FPB) and the Federation of Small Businesses have both warned that small vendors would find it both "difficult" and "costly" to make the change.

The FPB said firms should be given 30 days, rather than the legally required 14, to issue invoices to provide "breathing space" to establish the rate.

It also advised HM Revenue and Customs to publish a detailed explanation on changes to the rate, so businesses could check if the cut was being passed on.

SMdec2008

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