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Darling's VAT change a headache for retailers
Can't make December deadline? VAT's life...

By Julian Goldsmith

Published: Tuesday 25 November 2008

The Chancellor of the Exchequer Alistair Darling's decision to cut Value Added Tax (VAT) from 17.5 per cent to 15 per cent is likely to be an IT headache for retailers according to industry commentators.

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Although a relatively straightforward task, analyst Butler Group and finance systems supplier Coda say the scale of change required, combined with the little notice given by the chancellor ahead of the sector's busiest time of the year, mean retailers will be entering a minefield in terms of risk to the business.

Butler Group senior research analyst Angela Eager highlighted that not only will retailers have to address pricing changes on the shelf and at the point of sale, but they will also need to test these changes throughout the entire inventory system, their supplier networks and ERP platforms.

"As a result, some retailers are expected to struggle and may not be able to think about applying the reduction until next season's goods arrive," she said in a research note.

Pete Crowe, IT director of retailer Fat Face, is unconvinced of the value brought by the change.

"This is causing a lot of analysis, management time and is generating a lot of technical effort in doing changes to a variety of applications. All this for little or no customer benefit," he told silicon.com.

A spokesman for Coda added retailers generally lock down development activity on their IT infrastructures over Christmas to avoid risk of systems failures.

He added that many retailers won't be able to change all of the prices on the shelves in time to meet the Chancellor's deadline of seven days and instead the best they can do is to post up generic price converters around stores and register the price change at the till.