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The Chancellor yesterday anounced a cut in the rate of VAT from the current 17.5% to 15%, effective from Monday 1st December.

The intention is to stimulate consumer spending to help businesses but, as Patrick at Blogstorm points out, this could turn out to be a major problem for some online retailers.

The savings are minimal for consumers; just over £2 off a £100 purchase, but as many e-commerce systems will have the 17.5% rate 'hard wired' into them, changes could be difficult to implement before Monday, making some etailers' prices less competitive.

There is also the issue of updating banner ads which display prices and uploading them again to ad servers, another time consuming task for etailers.

To make matters worse for online retailers, Alistair Darling sneaked in a 2p hike in fuel duty to offset the VAT cut.

Online retailers, especially those seeking to attract customers with free delivery offers, are vulnerable to rising fuel costs so this hike, coupled with the possible problems in changing the VAT rates on websites, means that the pre-budget report is not necessarily good news for e-commerce.

Will the VAT cut cause problems for your website? Let us know below...

Graham Charlton is a researcher at E-consultancy. Find him on Twitter here.

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Graham Charlton

Published 25 November, 2008 by Graham Charlton

Graham Charlton is the former Editor-in-Chief at Econsultancy. Follow him on Twitter or connect via Linkedin or Google+

2565 more posts from this author

Comments (4)

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zigojacko

We run our own e-commerce cms system and depending on what versions our clients are using, in some cases we are having to write an automated script to change the vat throughout the system come monday.

Is causing havoc for us and much confusion for our clients but it's easily overcome, in some e-commerce packages, it is easy to implement a vat change (as it with out latest versions of ours). Of course we are having to charge our clients for the manpower required to implement all of this.

over 7 years ago

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Vincent

I suppose it's fair to bring this issue to attention, but I'd be very suprised (and most annoyed) if I had to pay a developer much money to make this change in a modern ecommerce system.

Things like VAT, or any other tax related calculation, should always be planned to be a variable within the system, and easily changed by site administrators.

over 7 years ago

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Richard Morton

Vincent makes a fair point but the fact that there hasn't been a change in the VAT since e-commerce started (other than changes to energy rates and items changing to/from zero rating) implies to me that the vast majority of systems will NOT have this setup as a simple change. No doubt it is something to insist on in future developed systems but this is likely to be a cost to website owners both in terms of time and money.

I wonder if the pound shop will be reducing all their prices to 98p as they should do? A silly example perhaps but no-one is going to like it if a £9.99 item doesn't come down to £9.78

over 7 years ago

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Smart-Retailer

After upgrade of our retail Website a few years ago to ecommerce software from AceFlex, we are able to change the VAT rates for different product groups at any time with immediate implication to all future orders. We don't need to contact the company to help, because such parameters are changed in our back office on the Web.

about 7 years ago

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