HB Accountants

December

Increase in the standard rate of VAT

The standard rate of VAT will increase from 17.5% to 20% from 4 January 2011. The reduced rate of 5% and the zero rate will remain unchanged. Businesses need to ensure that they are ready for this change. 

For any sales of standard rated goods or services that take place on or after 4 January 2011 businesses should charge VAT at the new rate of 20%.

This means that businesses currently calculating their VAT using the VAT inclusive fraction of 7/47 should, from 4 January 2011, use the new VAT fraction of 1/6.

There are many rules which determine the correct rate of VAT to apply.

Goods/services provided before the change

The new rate generally applies to all VAT invoices issued by a business on or after 4 January 2011. However, where a business issues an invoice on or after 4 January 2011 and the goods or services were provided prior to 4 January 2011, the business may apply VAT at 17.5%.

Goods provided after the change

If a business has received a payment or issued an invoice before 4 January 2011 but the goods will be provided (or services delivered) after 4 January 2011 then the supplier has a choice, either:

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