Changes To VAT Will Increase Prices To Consumers

Tuesday, 2. December 2008

Did the measures regarding VAT, announced by the Chancellor of the 24^th November, have any affect on drivers or the industry? Not much is the answer. The VAT drop on fuel has been balanced out by increased duty but will the duty come off again when VAT returns to it’s current level? It will also have the affect of putting up prices (something that no-one else other than me seems to have picked up on, as it will increase transport costs. VAT is recoverable, whatever the level but duty isn’t so the move, whilst leaving the retail buyer in a neutral position, has an adverse affect on business users and transport companies, who can reclaim the VAT. They will now pay more than before the budget potentially putting all prices up. There will be a marginal benefit to those that privately lease their cars and a small benefit for private buyers that buy new cars for cash as well as companies that are not VAT registered. There are benefits to large fleets based on the resale value of VAT qualifying cars for cars being sold between now and when the VAT rate returns to its old level. But really it is pretty mediocre. By Graham Hill