Online firms best placed to absorb VAT rise, says BRC

Date: 1st November 2010

Small businesses operating in the UK's retail sector could face challenges trying to absorb the forthcoming VAT rise, it has been suggested.

It was announced earlier this year that from January 2011 VAT will rise from 17.5 to 20 per cent.

The British Retail Consortium (BRC) has said that online businesses will be better placed to absorb the rise than those on the high street.

Dale Atkinson, spokesman for the BRC, explained: "The advantage that online businesses have at the moment is that their overheads are obviously a lot lower.

"Their opportunities to consume the VAT increase and absorb as much of that as possible are in some cases going to be greater than for those with a high street presence, because their margins are potentially slightly broader."

The comments follow the publication of the latest Online Business Index by eBay, which showed that 63 per cent of online retailers do not expect to pass on the full cost of the rise to their customers.

Posted by Jacob Williams