VAT confusion hits the
high street

High-street retailers have announced they will respond in a variety of ways to the return of VAT from 15% to 17.5%.

The different approaches by stores to the tax hike is likely to leave shoppers confused.

Some high-street chains have not yet stated what they will do in relation to the tax rise, others will delay the increase in prices while others have said they are only imposing the rise on certain products.

VAT was cut to 15% in December last year in a bid to boost consumer spending during the economic downturn at an estimated cost to the Government of around £11 billion.

But commentators have warned that the increase back to 17.5% could deter shoppers and stifle the economic recovery.

The centre for economics and business research estimates that the VAT cut helped boost consumer spending by £6.8 billion, but it warned that retailers could expect a tough spring due to the increase in the tax and rising inflation.

But many groups have said they will not pass on the VAT increase to consumers through higher prices immediately.

Department store group John Lewis has said it will not raise prices in line with higher VAT until at least the beginning of February.

The group aims to be the last retailer to revert to the higher rate because of its 'never knowingly undersold policy'.

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