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View Full Version : Budget Day - VAT rise? - UK price increase?



Misfratz
22-06-2010, 07:42
Today is the day of the emergency UK budget in the UK, and it is widely reported that VAT is likely to be increased from 17.5% to 20%. For example, see here:

http://www.guardian.co.uk/uk/2010/jun/21/budget-2010-income-tax-removed-lowest-paid

Discussion of the budget itself is suited to P&R and not this thread. Here I am wondering whether GW will increase its prices to reflect the change, or absorb the deterioration in its margins.

My thinking is that GW will probably absorb the change at first, but seek to recoup it at its next round of price increases. It is, however, possible that GW will have an extra round of price increases in the autumn this year, rather than waiting for next spring [as has become normal].

[Of course, the rumours could be wrong, and VAT may stay the same]

frozenwastes
22-06-2010, 08:22
The economy is in bad enough shape to be having an "emergency budget" and GW just keeps jacking up their prices.

I'm guessing it was factored in as a possibility in the last June 1 price increase GW just had.

RevEv
22-06-2010, 08:28
In this case though any price rise is not due to GW pricing policy but the Chancellor of the Exchequer, who probably doesn't care two hoots about the pocket of the average gamer but is more concerned with reigning in budget deficits.

It would be nice if GW soaked up any VAT increase in their prices but, seeing how they immediately reduced their prices when VAT dropped to 15%, I do not expect they will, we can't have it both ways. GW products have always been expensive toys wrapped up in the myth of pocket-money prices, live with it.

Satan
22-06-2010, 08:38
What I haven't been able to understand is how your UK VAT can affect prices in other countries. Could anyone shed some light on that please?

I mean, where I come from, companies are exempt from the VAT (Though we have another system dubbed "Moms") as long as they're selling goods and services just between companies...

RevEv
22-06-2010, 08:44
Good question well put.

I would assume it is to do with where you are ordering from. If I, in the UK, order from the US do I have to pay State Taxes? Saying that, when I have ordered stuff from the UK whilst posted overseas I have been able to reclaim the VAT by contacting the vendor directly. GW do answer the question themselves and, rather than being the money grabbing ogres that many paint them as, they seem to be tied by International legislation.

http://www.games-workshop.com/gws/content/article.jsp?catId=&categoryId=&section=community&pIndex=11&aId=9300010&start=12

blongbling
22-06-2010, 09:26
if GW were to soak up the difference it would impact upon their profits negatively. As they are just getting back up on their feet I would see this as something they wouldn't do. When you consider that there is potentially no end date to the VAT increase (assuming it happens) they could find themselves under considerable financial strain as a result.

GW will put up their prices as will virtually every other company in the UK if the Chancellor tells them to

blongbling
22-06-2010, 09:29
What I haven't been able to understand is how your UK VAT can affect prices in other countries. Could anyone shed some light on that please?

I mean, where I come from, companies are exempt from the VAT (Though we have another system dubbed "Moms") as long as they're selling goods and services just between companies...

Strictly speaking any export from the UK goes VAT free to another business. If however you do not provide the exporter with a valid VAT number in your country then you are liable to have the UK VAT added.

IJW
22-06-2010, 09:56
VAT-free to businesses is true with a VAT number, but that's only within the EU. If an EU company sells goods to a person or company outside the EU there is no UK/EU VAT to charge.

However if it's physical goods rather than software there may be import/export duties when selling outside the EU.

Osbad
22-06-2010, 11:03
I expect GW will pass on the increase, as they also passed on the temporary saving when VAT went down to 15% for a year.

However, a small part of me wonders whether they will not, and that the 15% or so price rises in June were partially calculated with an expected VAT rise in mind?

darius-god-of-biscuits
22-06-2010, 12:04
VAT isn't 'free' between businesses, but a company can claim back for the VAT they have paid and so only pay tax on the 'Value' (ie price) they have added.

Export sales (outside the EU) are not subject to VAT.

Expect some price rounding: a 10 item (at 17.5% VAT) should go up to 10.21 (at 20% VAT) but retailers will probably round prices up to the next 10p.

PsyberWolf
22-06-2010, 12:40
I suspect that in their minds it really isn't to be treated as a normal price increase. Look for the prices to rise with any rise in the VAT.

Count Zero
22-06-2010, 13:16
VAT will rise to 20% from 4th Jan 2011

Putty
22-06-2010, 13:33
I expect GW will pass on the increase, as they also passed on the temporary saving when VAT went down to 15% for a year.

However, a small part of me wonders whether they will not, and that the 15% or so price rises in June were partially calculated with an expected VAT rise in mind?

I think GW will do another price increase either later this year or earlier next year.

The last time they did 2 price adjustments (read hikes :p) within 12 months was 2 years back if memory didn't fail me.

Lord Malorne
22-06-2010, 13:48
I hope GW do not, they recently sneaked a price increase through lately that peeved me (use more passionate language than peeved).

plantagenet
22-06-2010, 14:12
VAT up to 20% from beginning of January, so everythign will be going up then, unless GW decide that the recent hike already accomodated this VAT increase in it.

eriochrome
22-06-2010, 14:36
VAT up to 20% from beginning of January, so everythign will be going up then, unless GW decide that the recent hike already accomodated this VAT increase in it.

If the VAT had gone up in July they probably would have eaten it since changing prices 2 months in a row for this stuff would be really bad for customer relations but since it is 6 months down the road they can essentially use it as an excuse to do next years price rise early.

Mini77
22-06-2010, 14:50
Standard blister mini with 17.5% VAT price is 8
Standard blister mini with 20% VAT price is 8.17

Despite the difference in price, GW's profit on that item remains the same.

Count Zero
22-06-2010, 15:11
i wonder if they will make some readjustments to make prices 'even' again. i know they didn't when the VAT was reduced but we knew that would be a short term change, so far i think the 20% will be indefinite, or maybe they will just run with it till the June price rise and even things out then.

blongbling
22-06-2010, 15:26
Standard blister mini with 17.5% VAT price is 8
Standard blister mini with 20% VAT price is 8.17

Despite the difference in price, GW's profit on that item remains the same.

potentially not depending on the relative costs of the items involved in the manufacture of the models

Mini77
22-06-2010, 15:33
All base costs (materials, manufacturing, packaging, distribution etc) remain the same. Only the amount of VAT (paid or charged) is changed.

AndrewGPaul
22-06-2010, 15:58
If someone outside the EU buys something, they don't pay VAT on that item. Some companies will remove the VAT from the price, while others will just pocket the 17.5% as extra profit.

Assuming the seller is a large enough company, that is; below a certain threshold of annual turnover, you don't have to declare VAT and pay it to the Exchequer. On the other hand, you don't get to claim back VAT on stuff you buy for the company.

Mini77
22-06-2010, 16:04
If someone outside the EU buys something, they don't pay VAT on that item. Some companies will remove the VAT from the price, while others will just pocket the 17.5% as extra profit.

Assuming the seller is a large enough company, that is; below a certain threshold of annual turnover, you don't have to declare VAT and pay it to the Exchequer. On the other hand, you don't get to claim back VAT on stuff you buy for the company.

Spot on. It's fair to say the majority of the public don't understand VAT and how/when it is applied. All they see is an extra charge.

machine_recovered_meat
22-06-2010, 17:22
Spot on. It's fair to say the majority of the public don't understand VAT and how/when it is applied. All they see is an extra charge.

And a lot of businesses can't quite get their heads around it to boot :D

If your turnover is under 70k you are not obliged to register for vat, but you can if you expect to exceed that threshold or for a variety of other reasons. If you turnover more than 70k then you've got no choice - you register or eventually get taken down by the treasury attack dogs.

If you're not registered for vat, you can't charge it to people (which doesn't stop a multitude of bandits from doing so)

You are not allowed to charge vat on non EU sales as they are outside the scope of vat. Equally, you don't always pay vat on purchases made within the EU (dependent on another variety of factors).

The thing to consider is this:-

As vat is charged on the sale price, any increase in that sale price will increase the amount of vat an item will attract, so if they bump the prices, they'll be paying more vat.

I'm not saying that will stop them from raising prices - it'd take an act of god to do that:eyebrows:

Usually what happens is that there'll be a smidgen of increase in price, to absorb what would be lost had the rate not changed.

Unfortunately, I suspect the 20% rate is here to stay.

RevEv
22-06-2010, 17:41
GW are very clear about VAT on goods ordered from overseas


Games Workshop is an international business and has to comply with tax legislation in all the territories in which it trades. The taxes that apply to you transaction are determined by the destination to which the goods are being shipped (see also the note on web store pricing).

For more detailed information on specific countries the link I gave earlier is very good. This is also in line with other international internet traders (such as Amazon).

As to whether we will see the price rise from Jan 4 2011, I'm afraid I think we will.

Lord Malorne
22-06-2010, 17:44
I agree with RevEv.

crandall87
22-06-2010, 18:35
And a lot of businesses can't quite get their heads around it to boot :D

If your turnover is under 70k you are not obliged to register for vat, but you can if you expect to exceed that threshold or for a variety of other reasons.

And this is a massive issue for myself personally. I am quite lucky that turnover is very steady so I can almost control it by restocking a certain amount each month. I would love to restock loads more but paying and charging VAT despite being able to claim some back would be a huge financial blow so therefore at this moment in time I make sure I do not need to register for it.

Back to the original question and I do believe the increase will affect GW. This isn't a year long increase like the decrease was. I think the 20% VAT could stay as long as this government is in power. Most european countries pay 20% VAT or more and I this just brings us in line with them.

Mini77
22-06-2010, 18:43
Generally, voluntarily registering for VAT if you're under the threshhold is only viable if you have sufficient overheads (to offset the VAT you pay). If you have a business with low overheads and low costs, and you're under the 60k per annum or whatever it is now, then you're better off not registering.

Back to the topic, I also believe the 20% rate will be permanent, as well as necessary. Realistically the difference isn't much (over 500 the difference is just a tenner).

RobC
22-06-2010, 18:49
There are instances where a VAT-registered business can gain money from it. It's fiendishly complex (one of the reasons why I'm not VAT-registered), but essentially you charge VAT on your invoices, but only pay a percentage back to HMRC. The actual rate depends on your business sector.

The trade-off is that smaller clients (those not VAT-registered) may go elsewhere because you're now charging them more for the same.

GraemePaul
22-06-2010, 20:00
GW are very clear about VAT on goods ordered from overseas



For more detailed information on specific countries the link I gave earlier is very good. This is also in line with other international internet traders (such as Amazon).

As to whether we will see the price rise from Jan 4 2011, I'm afraid I think we will.

Hi RevEv,

I know this statement to be true as an overseas buyer of GW products but why does this never apply to Forgeworld orders? Every time Ive tried to get them to take VAT off their prices they have always fobbed me off and with VAT going to 20% I really want to know what I need to do to get that VAT taken off.

Thanks

GraemePaul

de Selby
22-06-2010, 20:11
Threaten to report them to HM Revenue and Customs? I don't know actually, I have a feeling that perhaps they have some accounting system whereby they have a higher price list for overseas sales and thus what you're paying isn't actually VAT. But I know nothing about this subject so I'll shut up.


Mostly what I wanted to say is that I can absorb a 2.5% price increase but I hope GW doesn't use it as a trigger for more substantal rises (rounding up). The demise of price bands and their honest handling of the temporary reduction gives me some hope here.

RevEv
22-06-2010, 21:59
Hi RevEv,

I know this statement to be true as an overseas buyer of GW products but why does this never apply to Forgeworld orders? Every time Ive tried to get them to take VAT off their prices they have always fobbed me off and with VAT going to 20% I really want to know what I need to do to get that VAT taken off.

Thanks

GraemePaul

Not being a tax expert I couldn't answer that. I would assume it's to do with where you are living and the reciprocal tax arrangements between countries.

EDIT: From the Inland Revenue Website

The United Kingdom consists of Great Britain, Northern Ireland and the waters within 12 nautical miles of their coastlines.

It does not include the Channel Islands or the Isle of Man but for VAT purposes the Isle of Man is treated as part of the UK. If you have customers or suppliers in the Isle of Man, the VAT rules are the same as if they were in the UK. Goods sent from the UK to the Isle of Man or vice versa are not regarded as imports or exports for VAT purposes.

There is no VAT in the Channel Islands. Goods passing between the Channel Islands and the UK or he Isle of Man are imported or exported for VAT purposes.

Clear as mud really

Fredox
22-06-2010, 22:38
I doubt it will happen but theoretically could GW drop the value that the items are taxed on so the retail price doesn't change and absorb that cost into the business? Don't see GW doing it but it would be nice.

AndrewGPaul
22-06-2010, 22:56
I'm not sure what Forgeworld do is technically illegal.

For sales inside the EU, a 100 miniature actually costs 85.11, plus 14.89 VAT. For sales outside the EU, it costs 100 plus 0.00 VAT.

There was a thread on VAT (http://theminiaturespage.com/boards/msg.mv?id=198660) on The Miniatures Page recently. Of note is fighting15s' second post, halfway down the page; the money that would normally be payed in VAT may well be subsidising the international postage costs.

GraemePaul
22-06-2010, 22:58
Not being a tax expert I couldn't answer that. I would assume it's to do with where you are living and the reciprocal tax arrangements between countries.

EDIT: From the Inland Revenue Website


Clear as mud really

So judging by that as a Channel Islands resident I am within my rights to ask forgeworld to deduct VAT from any purchases I make and they have to honor that deduction (as is already done on the Games Workshop main site)?

AndrewGPaul
22-06-2010, 23:08
Not sure. If you're in the EU, then you have to pay VAT anyway (although I can't remember if you pay VAT in your country or the seller's). If you're not in the EU, then you're not covered by EU pricing laws, and Forgeworld can charge what they like - at present, non-EU sales are charged 17.5% more than EU sales.

You can ask, certainly. I just don't think you'll get anywhere. :)

ashc
22-06-2010, 23:17
I would expect a price increase to hit on January 4th 2011 of the 2.5% VAT increase plus a usual price increase.

But that would be me with my cynical hat on :angel:

Lord Malorne
22-06-2010, 23:19
So how much would a rhino be then? They are 20 now after a sneaky price update yes?

ashc
22-06-2010, 23:21
Weeeell, it would only be a few pence, but it wouldn't surprise me if GW just rounded it to a nice 20.50 for you :rolleyes:

burning crome
22-06-2010, 23:28
the increase in vat was hardly out of the blue it must have factored into the increase that we've just had. Plus most of the kits are very round figures e.i 20 - 30 i can't see them starting to charge 20.50 or 30.75 for one all the box have those prices printed on them.

Chaos and Evil
22-06-2010, 23:30
the increase in vat was hardly out of the blue it must have factored into the increase that we've just had. Plus most of the kits are very round figures e.i 20 - 30 i can't see them starting to charge 20.50 or 30.75 for one all the box have those prices printed on them.

A couple of years ago all of GW's prices were round figures... it's only relatively recently that they've started to let .50p's creep into the price list... so I don't see 25p's as being much of a step to take, really.

burning crome
23-06-2010, 00:46
Ok they might have been bad examples since they do work out in 25p but what about the 15 or 12 stuff sure they won't start going up to 15.38 or 12.30. Ok they could start rounding them up or down to nearest 25p but trading standards might have a few thing to say about that. Quite a few company got rapped on the knuckles about not reducing their prices when VAT when down.

simonr1978
23-06-2010, 02:33
Really? IIRC at the time it was pretty much up to the individual retailers whether they wanted to pass the cut onto the customers or pocket the difference themselves. My guess is that this would be similar, if GW want to round up to the next whole pound or even make it a nice neat 5 price point then so long as HMRC get their appropriate cut no-one in the officialdom's going to care and unless they're somehow misrepresenting their goods (Which they aren't now and a price increase isn't going to change that) I can't really see how trading standards have any grounds to get involved at all.

Edit: Oh, and VAT isn't calculated like that anyway. For an item with a sticker price of 20, you curently pay 17.02 for the item and 2.98 VAT. An increase in VAT to 20% should put the sticker price to 20.42. It's +2.5% of the pre-VAT price, so an extra +2.5% of 17.02 not +2.5% of 20.

AndrewGPaul
23-06-2010, 10:39
Yeah; the new price of something that currently costs X will be 1.02X.

Grimstonefire
23-06-2010, 11:45
I'm just hoping that they factor in the 2.5% increase when they are looking at their regular annual increases, because they sure won't be dropping it if it ever comes back to 17.5%.

I know absorbing it now means they take a hit, but if they're not dropping it afterwards that's increasing the rate in real terms in the long run isn't it?

lanrak
23-06-2010, 11:45
Hi all.
Will we see this?

'Dear rabid fans who will pay any price for our product.
Despite the fact we raised prises on average by 15% already this year to cover our complete lack of ability to run this corperation efficiently.
(Our products are now approximatly twice as expencive as our competitors.)
We feel you would not want the multimillion pound multinational company that you slavishly support have to loose any of their undeserved profit.So to celebrate your devotion, we are going to increse prices to the next 1 or 5 price band.
Remember this is down to the nasty Chancellor of the Exchequer putting up VAT on all goods.NOT us being greedy cash grabbing souless coperate suits.
(And you will belive any excuse we care to tell you, so we dont have to try too hard do we....)'

OR.

'As we realise many are now effected by the economic recession, we feel it would be unfair to pass on the VAT increse to our customers .As we have already set the price point for our product this year we will accept the loss due to the 2.5% increasce in VAT.'
(As we charge on average 200% for our products compared to our competitors, raising prices again this year would be a catastrophic PR blunder.)

TTFN
Lanrak

EldarWonderland
23-06-2010, 12:24
Just two words to add to the above.

Mantic Games.

Good models. special offers - how can such a business model work? Oh yes, the buying public like what they see and buy their stuff.

RevEv
23-06-2010, 12:30
@ Ianrik

You Cynic.

Of course GW will absorb the extra cost, it's in their nature to be kind and caring in that way. However, as the increase does not come into effect until Jan 4 2011 it is highly likely that it will be only for a short period until they increase their prices (round about Jan 2011 methinks).

simonr1978
23-06-2010, 12:41
Hi all.
Will we see this?

'Dear rabid fans who will pay any price for our product.
Despite the fact we raised prises on average by 15% already this year to cover our complete lack of ability to run this corperation efficiently.
(Our products are now approximatly twice as expencive as our competitors.)
We feel you would not want the multimillion pound multinational company that you slavishly support have to loose any of their undeserved profit.So to celebrate your devotion, we are going to increse prices to the next 1 or 5 price band.
Remember this is down to the nasty Chancellor of the Exchequer putting up VAT on all goods.NOT us being greedy cash grabbing souless coperate suits.
(And you will belive any excuse we care to tell you, so we dont have to try too hard do we....)'

OR.

'As we realise many are now effected by the economic recession, we feel it would be unfair to pass on the VAT increse to our customers .As we have already set the price point for our product this year we will accept the loss due to the 2.5% increasce in VAT.'
(As we charge on average 200% for our products compared to our competitors, raising prices again this year would be a catastrophic PR blunder.)

TTFN
Lanrak

Credit where credit's due, they did pass on the VAT reduction when AFAIK they didn't have to and going by this, they're not passing on the increase when they easily could. True, you're only talking 21p per 10 spent, but even so.

One thing does strike me though, the VAT increase isn't coming in till next January anyway, so they wont be out of pocket for too long until the 2011 round of rises occur.

Edit: Beaten to it by RevEv

blongbling
23-06-2010, 13:43
Credit where credit's due, they did pass on the VAT reduction when AFAIK they didn't have to and going by this, they're not passing on the increase when they easily could. True, you're only talking 21p per 10 spent, but even so.

One thing does strike me though, the VAT increase isn't coming in till next January anyway, so they wont be out of pocket for too long until the 2011 round of rises occur.

Edit: Beaten to it by RevEv

it wasn't that clear cut if they were going to, it wasn't decided until a very late hour that they were going to change the prices....don't be deceived by the fact that they did, a lot of people didn't want to

RevEv
23-06-2010, 14:00
I believe that the directive from HM Inland Revenue was that the VAT cut was to be passed on, else it would have defeated the object of the exercise - to get people spending.

Mini77
23-06-2010, 14:07
You weren't allowed to charge 17.5% VAT when the rate was reduced, but there was nothing to stop businesses increasing their net prices, so that when the 15% was added the prices remained the same.

simonr1978
23-06-2010, 14:53
I believe that the directive from HM Inland Revenue was that the VAT cut was to be passed on,

Mini77 said what I meant, I was probably not clear enough there.


...else it would have defeated the object of the exercise - to get people spending.

Not entirely, that few extra % going into the company coffers might have made the difference between someone being kept on or made redundant, an order that might not have otherwise been made, a company that just stayed in business rather than going under, etc. I'm not an economist though, but I gathered that was the thinking, get people and/or companies spending either directly or indirectly.


it wasn't that clear cut if they were going to, it wasn't decided until a very late hour that they were going to change the prices....don't be deceived by the fact that they did, a lot of people didn't want to

I'll trust you on that, like I said though, they did make the cut rather than just bump up the net prices, so credit where credit's due.

RevEv
24-06-2010, 08:16
You weren't allowed to charge 17.5% VAT when the rate was reduced, but there was nothing to stop businesses increasing their net prices, so that when the 15% was added the prices remained the same.

In which case there tended to be an outcry by customers - they're not stupid you know!

Happened locally and the company had to backtrack rapidly, not certain they survived either due to the bad press they received.

Mini77
24-06-2010, 09:04
In which case there tended to be an outcry by customers - they're not stupid you know!

Happened locally and the company had to backtrack rapidly, not certain they survived either due to the bad press they received.

I never changed any of my prices and noone was bothered. I know a lot of small businesses that didn't adust their prices.

machine_recovered_meat
24-06-2010, 18:50
I think the only directive regarding the "VAT holiday" was that the rate was dropping to 15% and that came from the then Chancellor, Darling of the unbelievable eyebrows, to whit, that the rate was dropping.

Bit of a 'better be seen to be doing something than seen to be doing nothing' exercise more than anything else, for the minimal impact it had on that stage of the recession.

Wintermute
24-06-2010, 19:39
If you wish to discuss GW'S Pricing Policy then do it in the correct thread which can be found here (http://www.warseer.com/forums/showthread.php?t=209297).

Thread Closed

Wintermute