Simple in some ways, not in others...
Well, it's good to see the usual amount of ill-informed comment, badly-thought-out spouting and general "Oh, it's easy, I can do that in ten minutes" bollocks that have come to be the standard in comments on El Reg.
OK, for all you clever gobshites out there, here's some stuff to ponder...
On the plus side, most reasonable systems should have the VAT rate (or, in fact, rates) set in a single place and then apply these to ex-VAT prices at the point of generating invoices/receipts. So that part of the change should, indeed, be fairly straight-forward in most cases.
However, if you're a retailer, you have stuff on shelves and racks and hooks and wherever. Most of that stuff has price tickets on it. Even if you have some whizzy EPOS system that just scans bar codes and does the maths, you still usually have the price on there somewhere for the punters. So... if you're going to pass on the VAT cut, you now need to calculate all your new VAT-inclusive prices and re-ticket all of your stock. In a week. And while continuing to trade normally. (Ironically, this might actually prove to be easier for the large retailers than for many small businesses - at least they've got the bodies and may have automated systems in place to help.)
Next up, suppose you're a mail order business with a real physical catalogue as well as an online one (or instead of an online one). You printed your last catalogue run of umpty-thousand copies in September (economies of scale and all that) and the next one isn't scheduled until March or something. And all your existing catalogues have your old VAT-inclusive prices in them. And, perhaps, there's a mixture of VAT rates in the products you sell as well (OK, only likely to be a mix of full VAT with zero VAT, but...) So you can't just say "Oh, whenever anyone places an order, we'll just tell 'em to cut 2.5% off the payment that they send us (well, actually something like 2.127660% given the way that VAT works)". So there's a bit of a sod. Unless you want your customers to send in their order and then wait for you to invoice them the correct amount before actually carrying out the transaction (maybe feasible on telephone or online sales, but not so easy via the post - and it still doesn't fix the minor hassle of all your customers now having catalogues with incorrect prices in 'em).
Next up, suppose you're a manufacturer or distributor of products and you've set your UK RRP for a given product at some convenient level such as £55.99. OK, so it's up to your end customers what they actually charge for the product in their own shops, but do you contact all of them and say "Oh, by the way, the RRP is now £54.80". Or, more to the point, do you go to all the hassle of producing a complete new RRP list and send a copy out to all of your trade customers. In a week. While continuing to trade normally. (Probably not - you just tell your retailers to sort it out themselves.)
And, while on the subject of trade sales, what about trade terms? On the one hand, at least it's easy from the pricing/invoicing point of view - customer orders two thousand widgets, knowing the ex-VAT price and that any additional works cost, delivery, VAT, etc. will be added. System calculates total ex-VAT price, adds any additionals and VAT and the customer gets invoiced. Easiest transaction of the lot. But, on the other hand, the customer is on thirty day terms (say) and they placed an order last week. The order was processed and shipped and the invoice raised (with 17.5% VAT) last Thursday. It doesn't fall due for over three weeks, by which time the VAT rate is 15%. Do you just process the invoice as stands or do you re-issue it at the new VAT rate? Or do you handle them on a case-by-case basis? Are you on standard VAT accounting or cash accounting (or something else altogether)? I haven't checked everywhere yet, but haven't seen any pronouncements or guidelines from the Government or HMRC as to what they are expecting people to do about this kind of thing. Neither have most of the accountants I've spoken to.
And, through all of this and assuming that you pass the VAT reduction on to your customer, the punters actually end up saving a pretty piddling amount of money! Buying a DVD for, say, £11.75? Great, you're gonna save 25p. Buying a new TV for 500 quid? You're gonna save just over a tenner. Come on guys! You can probably save far more money just by haggling with the salesman or the shopkeeper! Or waiting for something to go on sale somewhere (which will usually get you at least 5-10% off the full ticket price, if not more).
Funnily enough, when the idea of a VAT cut was first mooted, I thought "Hmmm... Not such a bad idea, relatively easy to implement, cuts prices a bit, might tempt people to spend a bit more money, etc." However, the more I've thought about it and looked at what's involved (and what good it's likely to do), the more I think it's a bloody stupid idea. Unless you're just going to do away with VAT altogether for a while.
Having said that, one of the other comments does make the very good point that it would actually be a whole lot easier if our retail pricing was done in the same way as the US - ex-VAT price labels, with tax added at the till. If nothing else, that would solve most of the practical problems of tax-rate changes, as well as making it clear to Joe Public just how much of their £9.99 total is actually earmarked for the quarterly insanity that is the VAT return.