VAT to remain at 20% for a very long time

Date: 6th July 2010

UK businesses could be among those to be interested in the recent comments of one VAT expert.

In an online Q and A session for Accountingweb, Neil Warren, a writer, lecturer and consultant on VAT, said that once the rate is increased to 20 per cent on January 4th 2011, it is likely to remain there "for a very long time".

However, the expert said that the rise may not necessarily lead to a reduction in consumer spending.

"A key point is that when the VAT rate went down to 15 per cent in December 2008, the evidence indicated that it did not encourage consumers to spend more.

"There is an expectation that the increased rate will not encourage them to spend less in January - let's hope that is the case."

Chancellor of the exchequer George Osborne announced in the coalition's first emergency Budget last month that the rate will increase to 20 per cent early next year.