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The VAT increase: who suffers?

Ian Hyde and Jon Robinson consider the sectors that will be most affected by the increase in the standard rate of VAT, and other implications

It came as no great surprise that the Chancellor announced in his emergency Budget on 22 June that the standard rate of VAT is to increase to 20% from its current level of 17.5%.

The change will take effect from 4 January 2011 and will amount to the third change in the standard rate of VAT in just over two years given the temporary reduction from 17.5% to 15% that applied from 1 December 2008 to 31 December 2009.

The measure is forecast to reduce the budgetary deficit to the tune of £12 billion a year. Apart from the Treasury and possibly tax advisers there will be no winners from this increase but the losers will be distributed unevenly across business sectors....

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