More price increases

[J-G]

VAT...value added tax. I was a kid at school when this was introduced as we joined the common market as it was called then. I remeber asking teach why we had to pay it and not receiving a suitable reply. Now we've left, can we stop paying it now?
Regards from a old hard liner who remembers thing like this!

You obviously don't remember Purchase Tax and have no concept of a 'Sales Tax'. VAT simply replaced Purchase Tax and was/is vastly easier to manage -- I certainly wouldn't want to go back to Purchase Tax which was levied on the WHOLESALE price of the material but charged out depending upon the use to which the material was converted (what 'Value' was 'Added'). I destictly remember having to charge 16-5/8% of the wholesale cost of card if I used it to make Business cards with space to make notes but 0% if they were fully printed !!

Oh, before you say get rid of 'Sales Tax' altogether --- would you be happier with a 50% increase (a guestimate) in Income tax ?

 

[Misterdog]

drop VAT to say 10% for two years to get the consumer spending.

Though as Covid has cost 100's of billions and the government is broke then VAT is more likely to rise IMO.

 

[Woody2Shoes]

....
Cement was about £6 a waterproof bag last year for me to almost twice that now. Nearest B&Q to me is limiting them to two per customer so I'm told
.....

Lawks! Down south, B&Q are still doing cement at about £4.80 a bag - with a limit of 5 bags per customer.

Cement is an interesting example.

The main cost inputs are gas (basically burning limestone) and diesel (trucking the stuff round the country). The cost of both these inputs has gone up markedly over recent months as the price of oil, which crashed with Covid, has "recovered" to the low $70's (although this is now not so different from the pre-Covid price).

There is also the question of supply and demand (and availability of alternative products/suppliers):
- Because it's very bulky, there's little commercial incentive to ship it in from overseas, so we generally rely on domestic production. There are no real alternative for many applications. It also has a short shelf-life, so can't really be "stockpiled".
- Large economies of scale exist in producing what is in effect a commodity, so new plants require large investment and long-ish timescales. Ownership of existing plants has consolidated over the years (I made some cash when the Mexicans bought out Rugby cement a decade or more ago). So there are big reasons why production capacity has an effectively fixed upper limit.

So the problem is basically that supply is constrained. Demand changes recently include:
1 - A backlog of works that have been delayed due to Covid (it's difficult to judge the actual extent of this, because Brexit and Covid are still creating labour shortages which are probably constraining construction activity levels overall).
2 - My theory (based on no real information) - is that a significant part of domestic production capacity has also been diverted to supplying contracts for big infrastructure projects like Sizewell C and HS2

I think it will be interesting to see the annual reports of the cement companies in 6-9 months or so.

Cheers, W2S

 

[Jonm]

VAT...value added tax. I was a kid at school when this was introduced as we joined the common market as it was called then. I remeber asking teach why we had to pay it and not receiving a suitable reply. Now we've left, can we stop paying it now?
Regards from a old hard liner who remembers thing like this!

. We used to have purchase tax, levied once by the retailer. Only businesses selling to the public got involved in the tax and it applied just to sales, no claiming back tax on purchases. Nice and simple. I can remember going in to a shop and buying a dormer twist drill and being charged vat, it was my first experience of this new, all encompassing tax. Purchase tax was only applied to luxury items such as cars, washing machines etc. There was no purchase tax on tools, wood, metal, clothes, food, sweets, telephone bills, house extensions, grass seed, repairs to luxury items, garage bills, tyres, solicitors fees and much more.

Now we have virtually every business in the country involved in charging vat and claiming it back. Including those who do not sell to the public. What a ridiculous way of collecting tax, it must cost the businesses and hence us a fortune In administration. Then there is the complexity, a builder friend of mine had one job where he had to charge three different vat rates, so materials, plant and labour all had to be split in to the different vat bands. Pre vat days his involvement in tax would be limited to Income tax, which of course he still has.

No doubt someone on here will tell be why Vat is so much better than purchase tax.

 

[J-G]

No doubt someone on here will tell be why Vat is so much better than purchase tax.

I thought I already had !

The biggest difference between VAT & Purchase Tax - as far as Joe Public is concerned - is the fact that you were never told how much PT you paid, it was just included in the price - or not if the rate was zero (seldom). Incidentally, any manufacturer did claim back the amount of PT he paid. That's another point - PT was dealt with by manufacturers rather than traders.

It's too long ago so I no longer have the details at my fingertips but I was registered for Purchase Tax and even though my turnover was never going to mean that I MUST register for VAT, I knew that I would be wise to self register and am still completing my quarterly return which takes me 5 minutes whereas Purchase Tax reporting would take a number of days. Even then, an inspector could well decide that in his/her opinion it had been incorrectly charged and issue a fine.,

AFAIAA, Materials, Plant & Labour are all charged at 'Standard' Rate so I think your builder friend is mistaken. There are very few anomalies in VAT, though naturally there are some, such as children's clothes (charged at zero rate) being large enough for small people but that sort of thing is normal in any kind of law drafting.

Most (if not all) oddities are the province of specific industries such as Energy where the 5% rate stands. The majority of goods are either 'Standard' or 'Zero', the other two categories being 'Outside Scope' and 'Exempt' the later mostly to do with financial transactions and the former deals with low volume trade between non-registered small businesses - both on the extremes of the 'Normal' business spectrum.

Another 'benefit' of VAT is that it can be used as a crude method of controlling the economy -- by reducing the standard rate in an effort to promote spending -- whereas Purchase Tax was far too complex to be used in this way.

 

[JobandKnock]

--

 

[bushwhaker]

I think that reason is pouring the money from FED and ECB for stimulating the economy. All raw materials and energy are up.

 

[fhsa]

VAT...value added tax. I was a kid at school when this was introduced as we joined the common market as it was called then. I remeber asking teach why we had to pay it and not receiving a suitable reply. Now we've left, can we stop paying it now?
Regards from a old hard liner who remembers thing like this!

Surely you remember the purchase tax that VAT replaced? All it was in effect was a change of name.
Also an old-timer who had to do sums in £sd

 

[Phil Pascoe]

VAT? I used to get caught out doing my books quite regularly - the figures would almost tie up, but not quite. Everything I sold carried VAT except lighter gas and nuts and raisins, which were VAT free. Lighter petrol carried VAT, as did peanuts.
I always remember purchase tax. I remember getting licensed trade freebies, two dishes with shaped rims so they fitted together as a box. One of the sherry companies, iirc. The rep. said of course they were ash trays not boxes - the tax was 33% on ash trays but only 15% on boxes.

No it wasn't just a name change, it was a very different system.

 

[Keith Cocker]

We could blame Brexit if we were that way inclined.

I am and I do!!!

 

[AlanY]

Remember when the price of crude skyrocketed to $120 per barrel, causing fuel at the pump to hit £1.30 per litre? Well, crude is now $74 per barrel with pump prices being around the £1.34 per litre mark.

Somebody is taking the 'pee'.

 

[Phil Pascoe]

I am and I do!!!

Funny how the price increases are worldwide, then, isn't?

 

[Paul555]

Not so much a whinge about rising prices...more an issue with how they are passed on. Very recently I called at a local timber yard needing a single length of 3m decking board for a particular job for someone. It had to be 150mm x 32mm to match the existing stuff and this was the only place I could find it within a reasonable distance. This company publish their prices on their web site and I had a printed price sheet just a few weeks old. It should have cost £.6.60. I asked the guy if he could cut in half so I could fit it in the car. The cut took 2 secs on a RAS. Came to pay...£11.40, + 50p for the cut!!! His reply when a queeried the price... "You should have asked how much" I paid because I needed the board, but took great delight in telling him that 50p cutting charge had just cost him the profit on 80 square metres of the same stuff for replacing the decking at the back of my own house the following week. I appreciate he's running a small business but there's a way to keep customers coming back and he's yet to learn it.

 

[Phil Pascoe]

Ah, but did you ask for 2 x 1.5m pieces? He might have been able to cut them from a damaged/badly flawed piece. Always better to have them in your tent peeing out ...

 

[Jonm]

I thought I already had !

The biggest difference between VAT & Purchase Tax - as far as Joe Public is concerned - is the fact that you were never told how much PT you paid, it was just included in the price - or not if the rate was zero (seldom). Incidentally, any manufacturer did claim back the amount of PT he paid. That's another point - PT was dealt with by manufacturers rather than traders.

It's too long ago so I no longer have the details at my fingertips but I was registered for Purchase Tax and even though my turnover was never going to mean that I MUST register for VAT, I knew that I would be wise to self register and am still completing my quarterly return which takes me 5 minutes whereas Purchase Tax reporting would take a number of days. Even then, an inspector could well decide that in his/her opinion it had been incorrectly charged and issue a fine.,

AFAIAA, Materials, Plant & Labour are all charged at 'Standard' Rate so I think your builder friend is mistaken. There are very few anomalies in VAT, though naturally there are some, such as children's clothes (charged at zero rate) being large enough for small people but that sort of thing is normal in any kind of law drafting.

Most (if not all) oddities are the province of specific industries such as Energy where the 5% rate stands. The majority of goods are either 'Standard' or 'Zero', the other two categories being 'Outside Scope' and 'Exempt' the later mostly to do with financial transactions and the former deals with low volume trade between non-registered small businesses - both on the extremes of the 'Normal' business spectrum.

Another 'benefit' of VAT is that it can be used as a crude method of controlling the economy -- by reducing the standard rate in an effort to promote spending -- whereas Purchase Tax was far too complex to be used in this way.

Interesting. With regard to my builder friend, it was a few years ago and I did not go in to details. I imagine he was charging his customer for new build (0%), extension (20%) and probably conversion from non residential to residential (5%). Not sure what AFAIAA has to do with it.

Clearly from what you say, purchase tax, as it was implemented was very cumbersome. But it seems to me that getting all businesses to charge vat on what they sell and claim it back on what they buy is also incredibly bureaucratic.

When vat was introduced, it coincided with hand operated calculators becoming available but was still a lot of extra work for many businesses. Perhaps computerised accounts now makes the collection comparatively simple.

I have never liked VAT, mainly because it was charged on everyday things, not luxuries, got us used to paying it then steadily increased it. Purchase tax encouraged repair rather than replace, vat as implemented in uk does not do that.

Anyway, changing VAT to another system would be very disruptive, expensive and no political will so I cannot see it happening. My understanding of collection costs are that having different rates considerably increases them, and the chancellor has just introduced a temporary reduction for some sectors of the economy. It would be interesting to know what the collection cost are.

I can recall being charged 25% vat for a towing ball, the justification at the time was that “it could be used to tow a boat trailer“ and boats were 25% vat rated.

 

[hairy]

I am and I do!!!

You've got that the wrong way round.
If it wasn't for Brexit everything would be much more expensive

 

[Paul555]

Ah, but did you ask for 2 x 1.5m pieces? He might have been able to cut them from a damaged/badly flawed piece. Always better to have them in your tent peeing out ...

He'd probably have charged me a stock search & handling fee!!!

 

[Jonm]

You've got that the wrong way round.
If it wasn't for Brexit everything would be much more expensive

Not sure if you are serious. At the moment brexit has not increased the value of the pound which would make things cheaper and it may have decreased the value of the pound, difficult to tell. As for other effects we will have to wait and see as we emerge from coronavirus and as the years (decades) unfold.

 

[Spectric]

My wife works for a (an upmarket) bank - they've been warned to expect negative interest rates.

So they would pay us interest on the money we borrow from them, cannot imagine anyone doing that and if you have savings you would be better spending now rather than later as your buying power will be falling.

 

[Phil Pascoe]

... if you have savings you would be better spending now rather than later as your buying power will be falling.

Precisely.