HMRC has officially begun to advise businesses to prepare to charge VAT at a rate of 17.5% again signalling the end of the temporary VAT rate cut. This could cause many problems for businesses that have more complex business transactions than those with instant payments for products and services. Any service that is provided or any product that is taken away by a customer before the 1st January 2010, should be charged at the 15% rate but any work that is carried out after this date, should be charged at the higher rate. Sales that cross over the changeover period are slightly different; if the service or goods were provided before the rate change and an invoice was raised after then the VAT should still be charged at 15%. If a business needs to charge for an ongoing job, for example building work, that runs over two differing VAT periods, they must spilt the job into two parts with the relevant VAT rate being charged for each part. However, if they choose to do this they will have to be able to demonstrate that the apportionment was fair. Other situations may cause problems as well, for example when determining which VAT rate to use when raising a credit note especially in industries like retail. The suspected disruption this will cause to retailers over the post Christmas period may cause Alistair Darling to delay the increase for this industry by increasing their grace period of 14 days in which to adjust prices to 28 days. Also, if you thought your VAT rate changeover worries will be ending after Jan 2010, you may be disappointed. There is belief that the VAT rate will rise further as the Treasury voiced their considerations in the 2008 pre-Budget Report to raise the VAT rate to 18.5% in 2011-2012. Managing Director of The Local Bookkeeper, Alex King, explains, ?Make sure your financial management professional keeps you up to date with any changes that may affect your business, as this is just one of many possible amendments that have not yet been confirmed and you don?t want to find yourself under investigation by HMRC just because you weren?t up to speed on the changes.? ¯
Covid-19 (Coronavirus) Update
Coronavirus is having a huge impact on all sectors of business. Despite this, businesses are still having to manage their books, file VAT returns, run payrolls and most importantly their credit control processes. TFMC is continuing to provide our full range of services through this difficult time. For the latest information and support visit our Blog section or use our app with regular updates sent direct to your phone.