Retail trade bodies welcomed the delay to the expected corporation tax rise announced in the pre-Budget report last week, but expressed concern that the Government was still not doing enough to combat the problems associated with the hike in VAT and national insurance rates.
In the pre-Budget report on December 9, Chancellor Alistair Darling announced that the rate of corporation tax paid by small businesses would remain at 21% rather than rising to 22% as expected.
The move followed promises by the Conservative Party that it would slash the rate to 20% if it won next year’s general election.
Retail trade body BHF-BSSA, which represents independent retailers, welcomed the announcement. Deputy managing director Michael Wheedon said: “The rate will still go up but we are pleased it’s not happening right now because the economy is in a fragile state and retail is instrumental to its recovery.”
He added that the confirmation VAT would return to 17.5% on January 1 was disappointing, but added: “We’re relieved it didn’t go as high as 20%, which was being mooted.”
The pre-Budget report also amended the Price Marking Order provisions to give retailers 28 days rather than 14 to change product labelling to reflect the VAT rise.
The British Retail Consortium (BRC), which had campaigned for an extension, counted this as a victory. BRC director general Stephen Robertson said: “This change will give retailers more time to achieve this huge, costly exercise without undermining their key mission – serving customers.”
However, while prices on products do not reflect those charged at the tills, many retailers are concerned that customers will complain when charged more than they expected. Wheedon added: “In a way, the extension just prolongs this problem.”
The pre-Budget report also announced that national insurance contributions would rise 0.5% next year as predicted, but that a further 0.5% would be added in 2011.