Rip-off QVC - no VAT reductions

[Dips]

Typical QVC, only blinking retailer in the UK NOT to implement VAT reductions:mad: I had QVC on this morning at 5am, a repeat of the Dawn Bibnby hour, and out of interest, I checked whether any of the prices in this previously recorded show were now slightly cheaper on the website (including the p&p, which also includes a VAT charge). Why wasn't I surprised to see that they were still the same, so QVC are now trousering the difference!

[LorraineJ]

Can't say I am surprised. What is the situation regarding VAT, when the supplier will have been charged 17.5% for the goods, they will make a loss on the goods if they only charge 15%. At the very least IMHO they shoud lower their P&P costs.

[Pam]

Long time since I did anything to do with VAT but don't they claim it back? I know my hubby used to when he was VAT registered. Can't remember how it worked now though - might have got it wrong. Don't think he ever got anything back as what he charged was far greater than he paid.

[Marie]

If they pass on the savings to the customer, the retailer neither benefits nor looses out. However if they don't pass on the savings, then they do benefit. The arithmetic on this gets confusing as you generally have to calculate VAT on net prices ie without VAT and gross prices, ie with VAT, but I've tried to explain how it works below.

If a VAT registered business buys something with VAT on, they can generally claim this VAT back. So if they buy some goods for £100 net plus 17.5% VAT, ie £17.50, they claim the £17.50 back from the Revenue on their VAT return. So the actual cost to them is only £100.

If they sell the goods, say for £150 plus VAT at the old rate of 17.5%, the price charged will be £176.25. They will pay the VAT of £26.25 to the Revenue on their VAT return.

So on their VAT return, they claim back the £17.50 that they paid when they purchased the goods but have to pay the £26.25 that they charged when they sold the goods, so they end up paying the difference of £8.75 to the Revenue.

To reduce the selling price of £176.25 by the equivalent of 2.5% VAT, they would reduce it by £3.75, to £172.50. They would pay the VAT of £22.50 to the Revenue on their VAT return so would end up paying the difference between £22.50 that they chargd when they sell the goods against the £17.50 that they paid when they purchased the goods, ie £5.

So in principle it doesn't make any difference to them what rates they purchase or sell the goods at. But if they choose not to pass on the VAT savings to the customer, then they keep the difference.

Actually the way that the arithmetic works, they wouldn't keep all of the £3.75, but in the case of this example they'd benefit by £22.98. I can explain it in further detail (and have done on my website www.vatexchange.co.uk) but even my brain is getting foggy at this point! The reason that many retailers might not pass on the savings is simply that they will take the view that such a relatively small reduction probably won't make the difference between a customer deciding whether to buy or not. It might if you were going to buy a new car for £10,000 where the VAT saving would be £100s but probably not for an item costing £5 where the saving would literally be pennies.

Anyway hope that helps a bit, I know it's confusing, i've been working in VAT for over 25 years and my brain still gets befuddled doing these sorts of calculations.

[LorraineJ]

Thanks Marie for such a good explanation. I had forgotten that QVC won't lose out as their accountants would make the necessary adjustments to how much they claim.

[Pam]

Thanks Marie, very well explained. I thought I was right. lol

[Little Jan]

well I went to Tesco sat and not only did they already have the vat reduced off the prices but they also had 25% off quite a few items, but took the vat discount from the larger amuont not the discounted price so I saved a few more pennies, not much but every little helps dooby dooby dooby do do:D

[SUPERCOOLWILLOW]

Jo34 on st.com said the following

"Anyway I phoned CS and they said that they haven't put them down yet, as she said as you can appreciate we have loads and loads of items on our website and it will take a few days to change the prices"

[Phree]

Thanks for the explanation Marie, I already knew how the VAT thing works - ie reclaiming the vat you pay when buying in stock and paying the amount you charge on goods sold - and as you say the saving to the customer is in most cases minimal and hardly likely to change a buying decsion with regards to the purchase of smaller items. However dips is correct in saying QVC are ripping us off - for every £10 of goods they sell and shipping they charge they apply they are are keeping 25 pence and if you think how much QVC turn over on a daily basis then that's a hell of a lot of 25 pences building up in their pocket instead of being passed on to the customer!

[Marie]

Actually I would be surprised if QVC don't pass on the savings, it would be appalling for them from a customer relations point of view if they don't. I suspect that they will make adjustments at the checkout (ie on your order total) this week if they haven't been able to amend the individual item prices.
Thinking about it I ordered a few Christmas pressies last week from them, should have waited until this week as the VAT reduction would probably have covered my p&p costs.

[Rentochops]

this amazes me, they manage to deduct my VAT (cos I am in Jersey) - wonder if it has gone down to 15%!

I wonder if they have taken the VAT off today's TSV - the ring which is nearly £2000!

[Dips]

Jo34 on st.com said the following

"Anyway I phoned CS and they said that they haven't put them down yet, as she said as you can appreciate we have loads and loads of items on our website and it will take a few days to change the prices"

Well, that's a load of Poo. Most retailers sell thousands and thousands of items (someone like Tesco will have about 5 times the number of items that QVC do) and they've managed it and they all have actual stores qwhere they have to change price edge tickets. QVC has a website and the vat rate will be a standard calculation.

[SUPERCOOLWILLOW]

Well, that's a load of Poo. Most retailers sell thousands and thousands of items (someone like Tesco will have about 5 times the number of items that QVC do) and they've managed it and they all have actual stores qwhere they have to change price edge tickets. QVC has a website and the vat rate will be a standard calculation.

i`m only passing on what she was said

[Dips]

I know, Ian, I wasn't saying it about you, I was saying it about QVC.

Interestingly, whilst they are under no obligation to pass on the VAT saving, they do have a legal obligation to issue a correct VAT receipt, so as of today, their VAT exclusive prices will have risen if the VAT inclusive prices have stayed the same.

[Marie]

Interesting that Graphicus already have amended the prices on their website to reflect the VAT cut. I appreciate that QVC have a lot more products but what I find odd is that there is nothing on the website (at least I can't find anything!) to confirm that the VAT cut will be passed onto the customer even if the individual item prices haven't been changed. They must be getting a lot of queries from customers about it all.

[Linderella]

I understood that businesses have from 1.12 to 31.12 to adjust the VAT so QVC still have time. Shame they didn't do it straight away though.

Linda

[blarf]

Wow - I'd of thought it is just a matter of changing a number in a computer program for a company as big as QVC.
I bought a pair of gloves in M&S today that were marked £15 and I paid £14.68 I think - they took the money off at the till. Not that hard apparently!

[Marie]

Just to be clear about this - the VAT rate is changed BY LAW with effect from today. There is nothing within the VAT legislation that gives them the right to delay implementing the change. If the retailers don't choose to change their prices to pass on teh benefit to the customer, then they are benefitting. But there is no legal requirement under VAT law for them to pass on the benefit.
I've ordered a couple of things from QVC today and will be keeping an eye out when they arrive to see whether or not they've passed on the benefit and will let you know!