Vat Rate Change in UK from 2010 : HMRC vat Guide

On 1 January 2010, UK Standard VAT (Value Added Tax) Rate will be increased from 15% to 17.5%. Vat Rate Change affects to sales of standard rated goods or services. If you do your business in cash, you must use 17.5% instead of 15% in calculation of VAT. Below, information about HMRC vat guide is given. Vat guide informs you how to account for the standard rate of VAT change. Due to change in VAT Rate, Special VAT schemes are provided. Change in Vat rate affects various business accounts, in continues suppliers services, in sales.

Information about change VAT Rate:

1. How to account for the VAT rate change: On the bases of business types, you should account for the change in the VAT standard rate.

• Retailers: If you are a retailer you must use the 17.5 % rate for all your receiving on or after 1 January 2010. But if your customer paid after 1 January for something they took away (or you delivered) before 1 January 2010, your sale took place before 1 January 2010 and you should use the 15 per cent rate. For more information, click here.
• Businesses that issue VAT invoices: You must use the 17.5 per cent rate for all VAT invoices that you issued on or after 1 January 2010. For more information, click here.
• Businesses that operated beyond midnight on 31 December 2009: If you have a pub, club, restaurant or similar establishment, a retail shop, a provider of telecommunications and your business operated beyond midnight on 31 December 2009, Special arrangements have been set up to help you account for the VAT standard rate change. For more information, click here.

2. Sales that span the change in rate: Span the change of rate is special rule for sales. If you provide goods or services before 1 January 2010 and raised a VAT invoice after that date you can choose account for VAT at 15 per cent. You do not need tell HMRC, if you do this.

• Services you began before 1 January 2010 but ended afterward: If you began work on a job before 1 January 2010 but ended afterward you may account for the work done up to 31 December 2009 at 15 per cent and the remainder at 17.5 per cent. If you choose to do this, you will have to be able to demonstrate that the apportionment is fair.
• Continuous supplies of services: If you provide a continuous supply of services, such as leasing of photocopiers, you should account for the VAT due, whenever you issue a VAT invoice or receive payment, whichever is the earlier. You must charge 17.5 per cent on invoices you issue and payments you received on or after 1 January 2010. You may, if you wish, charge 15 per cent on the services you’ve provided in the period up to 31 December 2009 and 17.5 per cent on the remainder. If you choose to do this, you will have to be able to demonstrate that the apportionment is fair.
• For more details, click here.

3. VAT invoices raised or deposits received before 1 January 2010 for sales you made afterward: If you issued a VAT invoice or received prepayment before 1 January 2010 for goods or services which you provide on or after that date, VAT will normally be due at the 15 per cent rate. In certain circumstances VAT is due at a rate of 15 per cent on the date of issue of the VAT invoice or receipt of payment before 1 January 2010 and a supplementary charge of 2.5 per cent then become due on the 1 January 2010. For getting more details, click here.

4. Special VAT schemes for small businesses:

• Cash Accounting Scheme: If you use the Cash Accounting Scheme you will need to be able to identify payments received after 1 January 2010 that relate to supplies made before that date. VAT at a rate of 15 per cent will be due on these payments.
• Annual Accounting Scheme: Your installments will not be affected by the change in the standard VAT rate.
• Flat Rate Scheme: The flat rate percentages have been re-calculated to reflect a standard rate of VAT of 17.5%. Some amendments have also been necessary to ensure that the rates accurately reflect the VAT paid by businesses in each sector. The new rates apply from 1 January 2010 until further notice.
• For more details, click here.

5. What VAT you can reclaim: You can claim back the VAT you have been charged by your supplier in the normal way. You will still be receiving invoices after 1 January 2010 by showing 15 per cent VAT relating to purchases you have made before the rate change. In these cases you should claim back VAT at 15 per cent. For more information, click here.

6. How to complete your VAT return: You should continue to receive and submit VAT returns in the normal way – monthly, quarterly or annually. The deadlines for submitting your VAT returns and making payments are unchanged. For return periods, that cover both before and after 1 January 2010, you will need to add together the VAT on sales charged at 15 per cent and the VAT on sales charged at 17.5 per cent to work out the total VAT on sales to be included in box 1 of your VAT return. For more information click here.

7. How to correct an error on your VAT return: If you find out that you have made an error, you can correct it in the normal way by making a voluntary disclosure or correcting it on your next return (subject to the normal limit).

Sources: http://www.hmrc.gov.uk/vat/forms-rates/rates/rate-changes.htm