VAT cut comes into force

The standard rate of VAT has changes today, Monday 1 December, for a period of thirteen months.

Chancellor of the Exchequer Alistair Darling announced the cut from 17.5% to 15% last week. It is hoped that it will allow retailers to cut prices further and tempt more shoppers onto the high streets.

The British Retail Consortium has reminded retailers that some goods prices will not be affected by today's VAT cut.

In a factsheet on the 2.5 point cut, the BRC pointed out that there will be no change to the price of goods that already have zero VAT, such as basic food items and younger children's clothing.

The price of cigarettes and alcohol will also stay the same, as the Chancellor has increased duty on these items.

The BRC also warned consumers that due to the way tax is calculated, the reduction in prices will be around 2.1% - and that the price at the till might well change before the display value in many stores.

Under the pricing practices code set out by the Department for Business, Enterprise and Regulatory Reform (BERR), retailers have two weeks from today to show VAT reductions on display and package prices.

BRC spokesperson Richard Dodd said that retailers would be "working extremely hard over the coming weeks to make the changes".

"The process of changing prices will involve diverting workers away from other tasks, which may present difficulties at this busy time of year," he told More Than Business News.