We had a question from a client which raised an interesting point this week, one that was actually obvisous but not one we have come across before. It concerns the levels of commission stores operating the retail exports scheme will receive after the change of vat rate.

We are all aware that retailers will need to review prices post 4 January 2011 to reflect that a higher proportion of the ticket price will need to be paid over in VAT. However, there can be benefits. For example, some retailers operate a Retail Export Scheme. This is where the VAT is refunded to a traveller when they leave the country with goods purchased in the UK. Normally the customer is not refunded all of the VAT; the refund is less an administration fee. The fact that the administration charge is usually based on a percentage of the VAT refunded means that a rise in VAT charged will lead to more commission.

One other point; the commission itself is zero rated, which means that the VAT increase will not affect it at all!