Happy New Year, but VAT will be going up
Will you be celebrating the start of a new year on 1st January? One thing you probably won’t be celebrating though is that on 1 January 2010 the standard rate of VAT is due to increase back up to 17.5%.
From 1 January 2010 businesses will need to ensure they return to charging VAT on standard rated goods and services at 17.5%. For VAT inclusive goods the familiar fraction of 7/47ths should once again be used to calculate the VAT element.
Businesses must use the 17.5% rate for all invoices they issue on or after 1 January 2010. However there are a few instances where the 15% rate can still be used.
If goods or service were provided prior to 1 January but the invoice not issued until after 1 January the 15% rate can still be applied. The 15% rate can also still be used where the customer has paid in advance before the end of the year, subject to the anti-forestalling legislation. Where work commences on a job prior to 1 January but is not completed until after the rate change both rates can be applied, 15% to the work carried out prior to 31 December 2009 and 17.5% to the work carried out after, providing you can demonstrate the apportionment.
The rate change will once again affect the various schemes in place for businesses. New rates will apply to both the Flat Rate Scheme percentages and to the Fuel Scale Charges, the revised rates will all become effective from 1 January 2010.
Businesses which have VAT returns that span 1 January 2010 will need to ensure they have applied the two separate rates for the period. Those operating the cash accounting scheme will particularly need to pay attention to the date of the invoice to determine the rate to be applied to payments received after 1 January.
If you are unsure how the change will affect your business it is well worth seeking advice as opposed to calculating your VAT incorrectly and being found out later in an inspection.
Biggleswade Chronicle - 20 November 2009