VAT increases to 20% with effect from the 4th January. The normal tax point rules…
On 1 January 2010, the standard rate of VAT reverts to 17.5 per cent after a period of 13 months at 15 per cent.
Goods that are supplied or taken away before the 1st January can still be charged at 15%, even if they are paid for after that date..
Some businesses will still be trading at midnight on 31 December 2009 and HMRC has acknowledged it would be unfair to expect them to stop what they are doing on a busy New Year’s Eve and change their systems to cope with an extra 2.5 per cent VAT. They will be allowed to continue applying the 15 per cent rate until their trading session ends that night, or until 6am, whichever is the earlier. The types of business affected are: pubs, clubs, restaurants and similar retail shops and telecommunications providers.
Exempt and partly exempt businesses (especially Charities) should consider taking advantage of early deliveries of goods, because, by so doing, they will minimise irrecoverable input tax.
Business owners should be aware that where a supply of services spans the change, i.e. it starts before 1 January 2010 but does not finish until on or after that date, the supplier may choose split his invoice to show amounts due at the two rates. As that treatment is optional, recipients of such services, whose input tax is not fully recoverable, should encourage their suppliers to take up the option.
You should remember that the VAT fraction for determining the VAT amount from a VAT-inclusive figure reverts to 7/47, from 3/23.
Changes to the flat rate scheme
The percentages were revised downwards on 1 December 2008 when the standard rate was reduced to 15 per cent. However, the changes from 1 January 2010 will not only reflect the reversion to the 17.5 per cent standard rate, but also take into account business patterns across the various sectors over the last year.