New Year thoughts on VAT

I was listening to the radio this morning and the discussions on the likely impact for retail from the VAT increase on the 1 January in the UK. Opinions swayed between it having  “no impact” to it being “the end of the world”.

The VAT issue has been an issue for the business of delivery since liberalisation first was mooted, and licences were granted, with Royal Mail not charging VAT on its products whilst its competitors were having to charge VAT – an uneven playing field many would argue.

So the reduction in VAT rates earlier this year should have been in favour of the competition in that they immediately had the benefit of a 2.5% discount on the services they offered.

So with the reinstatement of the 17.5% rate this week and rumours of the rate increasing to 20% in the New Year, will Royal Mail see customers returning to the fold as the tax benefits of Royal Mail are again thrown to the fore.

What impact will this have on the competitive landscape and how will the industry respond? Is it time that the playing field was finally levelled and Royal Mail, as a pseudo private company, has to fall in line and charge VAT on its services?

I would be interested in your thoughts and observations?

Please comment below…