VAT and MTD
Are you ready for VAT rate increase?
Published 16 December 2010
Archived article from 2010. Rates, thresholds and rules may have changed since then. Ask us for the current position before you act on it.
As you might know from the 4 January 2011 the VAT rate in the United Kingdom will rise from 17.50% to 20%.
HMRC have issued some rules and guidance in an attempt to encourage the compliance for VAT registered businesses.
- Businesses and self employed people should start accounting for VAT at 20% with effect from 4th January. If customers have an account and takes delivery of the goods before the change of then you account for VAT at 17.5%
- For all other transactions that require the issuing VAT invoices after 4th January 2011, the new VAT rate of 20%, should be applied.
- For supplies of services that span the change, then the old rate of 17.5% for those services can be provided.
- Suppliers issuing invoices prior to the rate change, but where delivery will take place after the 4th January, may charge VAT 20%.
- Businesses issuing quotes and estimates for work to commence after 4th January should quote the 20% rate. Customers willing to pay before that date can be charged at 17.5% (subject to the anti-forestalling legislation.)
- For any refunds or credit notes the business should apply the same rate as originally declared or invoiced. That is if the adjustment is made after 4th January and it relates to a sale declared at 17.5%, then the adjustment is at 17.5%.
- Any invoices issued for 12 months in advance, with monthly payments plus VAT must show VAT at 17.5% for all monthly payments up to 31st December 2010. All payments after that date must be at 20%.
- Sales of tickets to events such as (theatre, cinema, football season tickets) before 4th January 2011 will be subject to the VAT at 17.5%, even if the event takes place after the rate change. In these cases the tax point will relate to the receipt of payment.