Paul Rouke and PRWD on User Centered Design

As part of a fiscal stimulus package designed to boost the UK economy, the British government has announced a reduction in the rate of Value Added Tax from 17.5% to 15%, effective from Monday December 1st, to last 13 months.  This is the first time that the VAT rate has changed in 18 years - a whole generation has grown up knowing no other rate.

Retailers and consumers alike will be pleased to see a reduction in costs and prices as a result of the VAT cut, but there is a problem - retailers will have to update their prices in response to the change and they have only a week to do it.  Receipts, invoices and direct debits will have to change, as will calculations made by e-commerce websites and online billing systems.  As pointed out in the article linked to above:

The British Retail Consortium welcomed the cut, which will last 13 months and cost £12.5bn in a full year, but warned that getting the price cuts in place by Monday would be “a mammoth and costly task”.

…

“Shops will cope, but implementing a new VAT rate in just a week will be exceptionally difficult for customers and retailers at their busiest time of year.”

…

The logistical problems stores will face include changing IT systems that read barcodes, and shopfloor staff will have to change prices on store shelves, change swing tags on goods and put stickers over prices pre-printed on packaging. The BRC said there would be “rounding issues”.

Fortunately for our clients using UCDCommerce, we’re already prepared for the possibility of a change in the VAT rate and will automatically update their e-commerce sites for them.  Automatic adjustments to listed prices and billing mean that there’s no difficulty at all in keeping up with the VAT rate change.

But the story might not be the same for everyone.  The rate has been the same for so long that many software developers may have simply built the 17.5% value into their programs, making it costly and time-consuming to change.  And some smaller retailers may lack the knowledge or expertise to modify their software, so may be forced to pay for a software developer to make the modifications or risk charging the wrong rate of VAT.  Not only that, but the rate has to be set back again in January 2010!  The government has managed to create a whole new ‘Y2K’ bug and has given the British retail sector a week to fix it - good news for retailers who have well-managed e-commerce operations, bad news for those who don’t.

If you’re a retailer and you find that you’re having problems with the VAT change, it’s worth considering a few options:

• Talk to your e-commerce provider and make sure that they are updating your site with the new VAT rates
• Your IT department may have access to the e-commerce software and may be able to adjust the VAT rate
• In situations where the original developers of your e-commerce platform are no longer involved in the day-to-day running of the site, you may need to contact them for assistance
• If you’re using an open source e-commerce platform, you may be able to contact a freelance developer with knowledge of how to update the software

Of course, none of this is necessary for people who have well-maintained e-commerce systems.  PRWD’s clients won’t have to spare a moment’s thought to consider the implications of the change because we take care of these issues for them.  But this issue does highlight the importance of being able to react to changes far beyond your own control and it may well end up exposing many businesses who are not able to keep up.

If you would like to talk to us about your e-commerce operation, you can find our contact details here.

Tags: tax, UCDcommerce, VAT