Wednesday, 3 December 2008

VAT Reduction

It is not what we would call a fortune, but The British Government have announced (to help with the credit crunch and reduce inflation) that it will ( temporary ) lower the rate of Value Added tax from 17½% to 15%.

I have tried to digest how will this affect stamp collectors and stamp dealers that charge VAT.? Small dealers who trade under the VAT threshold do not have to register for VAT.

I have come to the conclusion that in reality it should affect us collectors quite a lot. But on a second thought after a small investigation I think it could turn out as just one big joke.

let me explain.

Well obviously this will mean that there will be lower prices for many stamp products (UK residents), but for how long. I suggest that you get your 2.5% discount NOW whilst you still can.

British stamps purchased from Royal Mail at the moment are zero-rated so it will not affect them, however presentation packs, Smilers Sheets, Smilers For Kids, albums, album pages, and so on are not, so these will be cheaper for a time. Perhaps until April when the price of stamp products are raised with the rate of inflation.

Smilers For Kids, for example, at the moment are reduced from £7.95 to £7.86, the reduction applying to the non-stamp element of the cost (stamp face value is £3.60).

Mint stamps from large dealers are not VAT exempt, but will they reduce or pass on the VAT reduction to its clients? By law they have to.

Philatelic literature, album and stamp dealer Stanley Gibbons are lowering the rate to 15% VAT, but they warn that its prices will be raised, following the rate of inflation in January 2009. I bet a pound to a penny this rise will be 2½%.

I guess this is purely a business decision so that they do not have to reprint their current catalogues. To comply with the law every stamp listed in their catalogues will have to be (should be) reduced by 2½%. There is no VAT when one buys actual catalogues, or handbooks, but there is VAT on all stamps, stamp albums, stock books and accessories.

What of other dealers and mail order companies that charge VAT, will they be reprinting their price lists? It is my guess they (and many other businesses) will follow in Gibbons footsteps. As I said earlier the VAT reduction for stamp collectors will eventually end up as zero, so if you intend to purchase anything, get in now whilst the going is good.

1 comment:

Glenn Morgan said...

Financial guru Martin Lewis states in his weekly e-newsletter:

"VAT cut - Get £££ back on purchases big and small. On Monday the VAT rate changed from 17.5% to 15%. Here’s a quick Q&A (thanks to JW at PriceWaterhouseCoopers for help).

Do shops have to cut prices? No. If they keep them at old levels, it’s a price rise, as effectively they’re increasing the pre-VAT price. Yet with the cost of price list changes & the poor retail climate it's likely. After all, dropping a £9.99 DVD to £9.78 looks weird. Many passing the cut on are more likely to leave some goods, and cut others by more than the difference.

It’s a 2.1% not 2.5% price cut. Imagine an item at £100 before VAT. Add the tax and it now costs £115, where it used to cost £117.50. This means you save £2.50 per £117.50 (not per £100) a cut of 2.13%.

Hope this is of interest to anyone hoping to save some money.