Get set for 20% VAT rate on January sales figures
Businesses need to start preparing now for the VAT increase in January, warn officials at Her Majesty’s Revenue and Customs.
The standard rate of VAT goes up to 20% on January 4 and must be charged on all standard-rated sales from that day.
For retailers, the new rate must be used for all standard-rated takings.
If a business issues VAT invoices, it must use the new 20% rate for all VAT invoices issued on or after January 4, which are issued within 14 days — or longer period that has been agreed with HMRC — of the provision of goods or services.
If goods or services are supplied before January 4, but a VAT invoice is issued on or after that date, the business can charge VAT at the old rate of 17.5%. For a contract that started before January 4 a business can choose to charge the old rate, 17.5%, on services actually performed before January 4, and the new rate of 20% on the value of services actually performed after.
From January 4, a business may receive VAT invoices with the new 20% rate, as well as VAT invoices with the old 17.5% rate for goods or services bought before the rate changed.
In such cases, a business can claim back VAT at the rate shown on the invoice.
The deadlines for submitting VAT returns remain the same, so businesses can continue to submit VAT returns in the usual way, whether monthly, quarterly or annually.
For returns that span the change in rate, firms will need to add together both the VAT on sales charged at 17.5% and those charged at 20%. A firm can then put this total in their VAT return.
A spokesman said: “In order to counter businesses taking advantage of the VAT rate change by making arrangements that aim to apply the 17.5% VAT rate to goods or services to be delivered or performed on or after January 4, anti-forestalling legislation has been introduced.”
Businesses can find more information about the rate change on www.businesslink.gov.uk/vatratechange/.
Chancellor George Osborne announced he was putting up the VAT rate in his emergency Budget in June. He said he anticipated the change would raise £13bn.