Retailers to go VAT-free in twist on discounting frenzy

The opportunistic tactic has been deployed to generate more excitement and spending than many believe the 2.5 percentage point cut revealed in this week’s pre-Budget report will stimulate.

In some cases it also allows retailers to present promotions already planned in a more timely and eye-catching way.

Toy retailer The Entertainer will mount a week-long VAT-free promotion on most lines from Monday.

Managing director Gary Grant said: “It’s a topical way of launching our promotion. We’ll pay all VAT in reaction to feedback from customers, who are extremely hard-pressed this Christmas.”
Home shopping specialist Boden has already launched a VAT-free promotion, publicised by an e-flyer. Headed “Keeping up with the Browns”, the leaflet says: “Gordon, if you’re going to cut VAT, cut it properly.”

It continues: “This offer includes childrenswear, which doesn’t actually have any VAT but, you know, what the heck.”

Chief retail adviser to PricewaterhouseCoopers Michael Poynor believes the tactic makes sense and that VAT-free Sales provide an opportunity for retailers.

He said: “Given the main point is to encourage spending and British shoppers have always been responsive to tax- and duty-free, the opportunity is to roll promotional discounts into a VAT-free offer. You can catch people’s imagination and keep them shopping by speaking to them in a language they understand.”

Retailers including Asda have successfully run VAT-free promotions in the past.