Big Food Group has written to all the mobile phone companies warning it no longer makes commercial sense for retailers to stock top-up cards because margins have hit rock bottom.
Following changes in the Budget, retailers’ margins on phonecards are now subject to VAT. As the cost price has stayed the same and the face value is fixed, retailers get a pitiful cash profit, said Booker director of trading Chris Emmel.
Booker used to buy £10 vouchers at £9.50 and sell them to retailers at £9.75 - so both parties made 25p commission. With the introduction of VAT, almost a fifth of this “already pathetic” cash profit would go to the Exchequer, he said. “The networks want to move the market towards e-top up. But not everyone wants to pay electronically and many small retailers don’t do enough business to warrant a terminal.”
Retailers across the country said they supported Booker’s move. Spar head of retail Steve Blackmore said. “It’s yet another case of retailers doing all the work only to see margins eroded. It’s just like utility payments. It leaves us stuck between a rock and a hard place - once you create a service, you have to maintain it.”
Philip Horsfield, commercial manager at Nisa member Leathley’s Quality Fare, said cash profit on phone cards had gone from “low to not worth it”.
Morning, Noon & Night marketing director Stephen Thompson said phone cards had become like cigarettes. “You make no margin but you have to sell them or people will go somewhere else.”
Bells Stores financial director Marcus Leek said local VAT officers were as confused as retailers about how to administer the new charge. “All the networks have approached this differently and it’s led to utter confusion. It comes down to a lack of consultation.”
A spokeswoman for Orange said: “The changes do not affect the amount Orange charges retailers, but retailers will now be required to account for VAT on their margin.”
The networks already paid VAT and taxing the retailers’ margin merely closed a tax loophole, she added: “Orange already pays VAT on the majority of the voucher value and does not advocate moves by retailers to pass the cost of the changes on to consumers.”
Elaine Watson
Following changes in the Budget, retailers’ margins on phonecards are now subject to VAT. As the cost price has stayed the same and the face value is fixed, retailers get a pitiful cash profit, said Booker director of trading Chris Emmel.
Booker used to buy £10 vouchers at £9.50 and sell them to retailers at £9.75 - so both parties made 25p commission. With the introduction of VAT, almost a fifth of this “already pathetic” cash profit would go to the Exchequer, he said. “The networks want to move the market towards e-top up. But not everyone wants to pay electronically and many small retailers don’t do enough business to warrant a terminal.”
Retailers across the country said they supported Booker’s move. Spar head of retail Steve Blackmore said. “It’s yet another case of retailers doing all the work only to see margins eroded. It’s just like utility payments. It leaves us stuck between a rock and a hard place - once you create a service, you have to maintain it.”
Philip Horsfield, commercial manager at Nisa member Leathley’s Quality Fare, said cash profit on phone cards had gone from “low to not worth it”.
Morning, Noon & Night marketing director Stephen Thompson said phone cards had become like cigarettes. “You make no margin but you have to sell them or people will go somewhere else.”
Bells Stores financial director Marcus Leek said local VAT officers were as confused as retailers about how to administer the new charge. “All the networks have approached this differently and it’s led to utter confusion. It comes down to a lack of consultation.”
A spokeswoman for Orange said: “The changes do not affect the amount Orange charges retailers, but retailers will now be required to account for VAT on their margin.”
The networks already paid VAT and taxing the retailers’ margin merely closed a tax loophole, she added: “Orange already pays VAT on the majority of the voucher value and does not advocate moves by retailers to pass the cost of the changes on to consumers.”
Elaine Watson
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