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Following the November 2008 pre budget changes we are amending our checkout prices to
reflect the reduced level of VAT of 15%. Please read on below for more information.
Q. Are you reducing your prices to reflect the changes in VAT? A.
Yes, we will be passing on the changes to our customers on all orders placed from Monday 1st December.
Q. How will I know that I am getting the
reduced VAT rate when I shop in store or online? A.
From Monday 1st December 2008, the new VAT rate will be represented in the price you pay at the till or online checkout. So the discount will be shown separately at the bottom of your shop or online receipt (Your online Receipt will say: VAT reduction).
Q. How do you calculate this? ....it doesn’t appear that the discount is equal to
2.5%? A.
Our selling prices are VAT inclusive so they already have the VAT applied. In order to apply the new rate of VAT, we need to take VAT at 17.5% off the previous selling price, then work out 15% on this value and add that back on. This means that the actual discount on the previous VAT inclusive price works out at 2.13%.
Example:
- A product priced at £11.75 (inclusive of VAT).
- First take off the 17.5% previous rate of VAT (divide £11.75 by 117.5% = £1.75,
this means the actual product price exc VAT is £10.00
- Now apply the new VAT rate of 15% to the £10
product price (£10.00 x 15% = £1.50), resulting in a new price of £11.50
- The total reduction to the retail price is 25p or 2.13%
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