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Who will benefit from the so-called retail VAT freeze?

There is confusion and misinformation in the UK retail market this morning with allegations that the VAT freeze announced by a number of large retailers in the UK may not be as beneficial to UK consumers as it first looked. Allegations that a number of companies have increased the price of many products ahead of the "VAT freeze" have hit the headlines today although these are unsubstantiated claims and certain to inject more confusion into the consumer market.

The fact is that the UK government has announced that VAT will return to 17.5% from 1 January after a concessionary period in which the rate was reduced to 15%. Many people believe it is highly unlikely that any retailer can afford to give away 2.5% of the gross price of goods and services, especially in the current economic climate. However, we have seen the likes of Tesco, Sainsbury's and Asda to name but a few confirm that they will retain the 15% VAT rate in the short term.

It will be interesting to see the impact of this "VAT freeze" in the short to medium term because UK consumers have been spending significant amounts of money over the festive period. Competition in the retail sector over the New Year is set to be as intense as it has been for many years.

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