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Chancellor confirms VAT to return to 17.5% in January

Chancellor Alistair Darling has confirmed in his pre-budget report that VAT will return to 17.5% on January 1, 2010.

The return to the standard VAT rate was widely expected by retailers. However there will be some relief as there had been speculation that VAT could rise to as much as 20% after Christmas as the Chancellor seeks to pay down some of the national debt burden.

VAT was reduced to 15% last year after Darling introduced a range of measures in an attempt to prop up the UK’s ailing economy.

In his November 2008 pre-budget report Darling announced that the 15% rate would start on December 1, 2008 but that it would revert to its original rate after December 31 of this year.

British Retail Consortium Director General Stephen Robertson said: “It’s a relief that VAT won’t increase beyond 17.5 per cent. Consumer confidence is weakening. Big price increases would fuel inflation, make people less likely to spend and hold back recovery.”

British Retail Consortium (BRC) director general Stephen Robertson described the news as a “relief” but added that “repricing tens of thousands of items is a mammoth task for retailers, at the busiest and most important time of year for most of them.”

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