Retailers rule out VAT deals

Britain's retailers expect price cuts within two years, following the landmark court ruling banning Vat on interest free credit deals, which will allow them to claim back an estimated pounds 3billion windfall.

Stores have ruled out reimbursing customers who have bought millions of products on interest free credit since 1973 when Vat was introduced, despite calls from consumer campaigners, because they say it would be too hard to trace them.

Sir Stanley Kalms, chairman of Dixons the chain, which has 800 shops, said : "That's just impossible to do, and the way it worked did not really affect the consumer. Obviously if we get the money back it's going to bring costs down, and that will bring prices down."

He added: "It's going to take several years to do this, and it's going to cause a few interesting arguments along the way.."

Among those who are also expected to benefit are Comet, which offers interest free credit on goods over pounds 200 at its 223 shops, and the multiples Allders, Courts and Cantors. They have already started trawling through up to nearly 25 years of accounts in preparation to reclaim the tax.

John Major said that the Government would "vigorously" contest the Court of Appeal judgment in the House of Lords, where he was confident of victory.

Although government ministers claimed that the amount that may have to be paid back had been exaggerated at pounds 5billion, Lord Bruce of Donington said in the House of Lords he estimated it could still be as high as pounds 3bn. The most substantial repayments are expected to be for the late 1980s onwards, when interest free credit deals became popular.

The first repayments, as much as pounds 36m, will be made to the Kingsway Furniture Group, parent to Primback, the liquidated company that brought the case to the High Court in 1994.