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VAT Returns to 17.5%

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Did it make any difference to your life?

After more than a year of being reduced to 15 per cent in the UK, VAT (value added tax - possibly one of the greatest misnomers) has returned to its usual rate of 17.5 per cent. However confusion reigns.

Despite HM Revenue & Customs insisting "If you are a retailer you must use the 17.5 per cent rate for all takings that you receive on or after 1 January 2010" numerous major chains, including Argos, Tesco and Arcadia Group stores such as Top Shop, Dorothy Perkins and Miss Selfridge said they will either absorb or delay the VAT hike.

"We work hard to keep prices down for customers, which is why we have frozen VAT on thousands of products at the lower rate of 15%," said a Tesco spokesperson. "A small proportion of products will have increased in price, but this is either because of special offers coming to an end or an increase in the cost price."

In the electronics sector virtually all manufacturers are expected to fall in line with the return to 17.5 per cent. Unsurprisingly this includes Apple, which has already increased its prices so that the 27in iMac starts from £1,378 (up £29) while a sim free 16GB iPhone 3GS is now a hefty £449.

The VAT reduction was designed to help save UK shoppers £11bn during 2009 and help fuel the economy. Whether it has been a success or not has been a matter for some debate. Personally I found it just meant price tags looked chaotic as typical price points such as £49.99 and £99.99 turned into messes like £48.93 and £97.87 and we all lugged around more change.

Still, my 9 key got a rest.

Wakey, wakey...

Link:
HM Revenue & Customs Official Announcement

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