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UK VAT change from 17.5% to 15%
Question
The UK government has announced that from 1st December 2008, the VAT rate will be reduced from 17.5% to 15% for a period of 13 months. How do I handle this in CactuShop? Will it cause problems?
Answer
This is simple to change from the back end of your CactuShop in the 'tax rates' area. Change the band that is currently set to 17.5% to 15%, and this should instantly take effect on all items that include VAT on your site.
Note that this change does NOT affect historical records of orders. CactuShop stores the actual VAT amount with each order, similarly the price of each item is also stored (in the invoice rows table). So any changes to tax rates or item prices will not retrospectively change the totals for orders that were made prior to these changes. That historical data is fixed. The VAT change will only affect orders made from that point onwards.
If your pricing includes tax
You should consider that if you display prices inclusive of tax (i.e. your pricesinctax config setting is checked) then your headline prices will not be reduced by this VAT change. Instead, the tax portion will be slightly lower, and the value of goods element slightly higher to compensate.
For this reason, to pass on the VAT cut to your customers if you have inc tax pricing, you would probably want to mark prices down. To do this, you can use the 'Mark up prices' option in the product menu of your back end, then select the 'Mark down prices' setting.
Important
A 2.5% reduction in the VAT would equate to a 2.5/117.5 reduction in the inc tax price, i.e. 2.1277% (consider for example that the price of an item previously sold at £117.5 will now be £115, which is less than an overall 2.5% discount). So be careful to avoid charging in and reducing your inc tax pricing by 2.5%.
Known Issues
If you have options products, the mark-down prices should work fine on the base version. But if you have price modifiers (e.g. +£1.99 for extra large), then these are not affected by the mark-down prices feature (only the base version is affected). Furthermore, if you have combinations products (options products with all combinations generated for stock tracking or to have a unique SKU/itemcode per item) then the price of these is not affected by the mark-down feature because they are a factor of the base version price and any price modifiers on the options. If your store has either of these scenarios (options products with price modifiers or combinations products) then please open a support ticket and we can look at your store and assist.