Retailers fear downturn after VAT rise

Retailers are set to be hit hard in 2011 as a result of the increase in the standard rate of VAT from 17.5% to 20% as the government looks to boost tax revenues to cut the UK’s debt levels.  


The rise which came into force on 4th January 2011, will affect any VAT registered firm that buys or sells goods or services that are subject to the standard rate of VAT. The majority of food products, children’s clothing, newspapers and magazines will continue to be zero rated. 


Shoppers are unlikely to feel the effects immediately as retailers are likely to absorb the costs as part of the January sales.


Phil Smith, Partner Moorfields “Retailers have had a tough time in 2010, especially towards the end of the year, when an expected increase in sales prior to the VAT increase was anticipated only to be over shadowed by the severe weather. The first three months of 2011 does not look to show a more positive outlook, the combination of the VAT rise, coupled with the public sector cuts means retailers are fearing the worse.”


If you feel your business could suffer as a result of the VAT increase and would like some independent advice please contact Moorfields Corporate Recovery LLP on 0207 186 1144. 


Moorfields Corporate Recovery LLP is one of the UK's leading independent firms of restructuring and insolvency specialists.


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