by Accountants in London - Jeffreys Henry LLP
There are now only two months remaining before the standard rate of VAT climbs from 17.5 per cent to 20 per cent. VAT registered businesses are being urged to prepare themselves for the change.
Any sales of standard-rated goods or services made on or after 4 January 2011 must carry a VAT charge of 20 per cent.
All VAT invoices must charge the 20 per cent on bills raised on or after 4 January.Retail businesses do not have to pass the increase on to customers but they will have to pay HMRC the additional VAT.
If a customer pays on or after 4 January for an item that has been collected or delivered prior to the 4 January, then the sale is normally deemed to have occurred before the change-over and the old 17.5 per cent rate applies.
Where the supply of services is continuous i.e. a consultancy service, a business must charge VAT at 20 per cent on invoices issued and payments received on or after 4 January. It can, however, apply the 17.5 per cent rate for the services that have been supplied up to 3 January and the 20 per cent rate thereafter.
Moreover, from 4 January 2011 there will be a new list of flat rate percentages. The threshold for joining the scheme will remain at £150,000 in respect of income in the next 12 months and the exit threshold will increase from £225,000 to £230,000.
Non VAT registered businesses should consider making any large purchases prior to 4 January and expect the cost of standard rated supplies to increase by 2.5 per cent. The VAT registration threshold of £70,000 remains the same.
VAT registered businesses that have questions about the time of supply and the tax point for any VAT transaction should contact their accountants to make sure the relationship between the two is correct.
Zero-rated (0 per cent) and reduced-rated sales (5 per cent) will see no change.
Jeffreys Henry LLP is a leading firm of Chartered Accountants in London.