VAT rate change could cause website chaos
filed in Misc on Nov.25, 2008
The Chancellor has announced a cut in the rate of Value Added Tax (VAT) of 2.5%. This takes the current rate of VAT to 15% and is the first change in the VAT rate since the early 1990s.
Back in the 1990s, ecommerce didn’t really exist and so many of the ecommerce systems that have grown up in that time have had the rate of VAT hard coded into them at 17.5%. Many companies will be realising that their ecommerce system cannot be updated without the intervention of a programmer (and his hourly rate!).
Ordinarily, this wouldn’t be a problem but the fact that the rate change comes into effect on the 1st December means that there is likely to be a frantic rush to get these systems working properly in time.
Remember the Millennium bug, which required millions of hours of programmer’s time to prepare for? Well, we may see something similar, but with only 6 days to prepare for it.
Come the 1st of December we may well see a few high profile red faces as companies fail to get their software working in time. Imagine the shame of a company like (say) Amazon when they have to admit that VAT was hardcoded into their system at 17.5% and they haven’t been able to change it in time! Conceivably, their entire operation could ground to a halt unless they can manually overcome the difficulties.
I’m sure the government didn’t see this coming. Come December 1st we’ll see which companies have properly prepared for it in the short time available.
November 26th, 2008 on 10:03 am
[...] brings us on to the recent change in the rate of VAT from 17.5% to 15%. Mass Media Design raises an interesting point:- Back in the 1990s, ecommerce didn’t really exist and so many of the ecommerce systems that have [...]
November 26th, 2008 on 12:00 pm
It’ll be interesting to see whether retailers do the fix properly or use a quick fix such as utilising discount codes with 2.5% off. Quite a few are using the quick fix.
November 26th, 2008 on 12:17 pm
I know that alot of the companies I have worked with as a programmer in the past have made the decision not to make any changes at all – they are going to be charging 15% VAT sure, but they are just marking up all their prices by 2.5% – exactly the same way the government has upped the duty on alcohol, tobbaco and petrol by 2.5%, essentially keeping the price on these things exactly the same. I don’t know if this classes as profiteering or not, but I know, bearing in mind the cost to companies without in house IT teams, that alot of companies are considering it.
November 26th, 2008 on 5:55 pm
Yes, it’s an easy fix to do the discount code. Especially since the VAT change is temporary (until the 18.5% rate comes in!
I think the short notice is a problem for a lot of companies. Hopefully most of them should just have to press a button, but for those that bought a cheap and dirty system it may not be as easy!
November 27th, 2008 on 7:32 pm
Except that it’s not actually a 2.5% discount…
Old price: £9.95
New price: £9.74
Discount Required: £0.21 = 2.128%
December 4th, 2008 on 5:59 pm
[...] the sheer range of search queries that brought people to the article. The article was called “VAT rate change could cause website chaos“. Below is a list of some of the queries that brought traffic in just one [...]
February 3rd, 2009 on 3:45 am
Very interesting article, as are some of your other posts. I have bookmarked for for future visits, keep up the good work