VAT reduction to cost IT £115m

Cost of changing systems to use new rate will hit business

Alistair Darling has cut VAT to 15 per cent

Chancellor Alistair Darling's 2.5 percentage point temporary cut in VAT will cost businesses £115m in terms of the IT costs involved in changing accounting systems, according to the Treasury.

The estimate comes in an impact assessment on the merits of the tax boost for the economy. The cost breaks down to £70m for the cut from 17.5 per cent to 15 per cent, and another £45m for restoring the 17.5 per cent rate at the end of 2009.

Any firm selling goods or services liable for VAT will have to update their financial management and accounting systems to take the new rates of sales tax into account in their pricing.