HB Accountants

January

Increase in the standard rate of VAT

 HMRC are reminding businesses to be ready for the VAT increase. In a recent press release HMRC Director of CT & VAT Jim Harra said:

'With the Christmas and New Year holidays almost upon us, businesses must be ready to implement the increase to the standard rate of VAT.'

'Don't leave it until the last minute to make any necessary changes to your book-keeping and accounting systems including invoicing and tills. You also need to make sure your staff are fully aware that the new 20 per cent rate must be charged from 4 January.'

As you are no doubt aware 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

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