Introduction »

Raising revenue

The Chancellor announced in the Emergency Budget that the standard rate of VAT is to increase from 17.5% to 20% for supplies made on/after 4 January 2011.

In principle standard rated supplies that take place after 3 January 2011 will be subject to the 20% rate, with the VAT fraction for supplies which are inclusive of VAT changing to 1/6.

As the date of change is not at the end of a month it does mean that most VAT registered businesses will need to exercise great care when completing the VAT return that spans the changeover date. Some may even need to charge different rates on an individual supply, where there is a requirement to apportion it over a period spanning the 4 January. HMRC have already provided detailed guidance on their web site at www.hmrc.gov.uk/vat/forms-rates/rates/rate-increase.htm but please get in touch if you would like some help in this area.

The guidance also provides revised fuel scale charges and flat rate percentages, ready for the changeover.

As with previous rate changes the time of supply rules will be of great significance, so a clear understanding of those will be vital to getting invoicing right. There may be opportunities for advance invoicing and payment at the lower 17.5% rate but anti forestalling legislation is in place to prevent misuse of this process. If you would like to discuss the best way to approach invoicing across this period, we would be pleased to help you.

Introduction »