VAT rate rise... are you up to speed?
BUSINESSES are being urged to get ready for January’s VAT rise.
The standard rate of Value Added Tax goes up from 17.5 per cent to 20 per cent on Tuesday January 4.
HM Revenue & Customs (HMRC) director Jim Harra, said: “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 January 4.”
Retailers must charge the new 20 per cent rate on all standard-rated takings received on or after 4 January 2011. But if a customer pays on or after that date for something they take away (or have delivered) before 4 January, the sale takes place before the rate change and the 17.5 per cent rate should be used.
Retailers who use electronic tills will have to re-programme them, so that the correct VAT rate is calculated and shown on till receipts.
Normally, businesses must use the 20 per cent rate for all VAT invoices they issue on or after January 4, which are issued within 14 days (or a longer period previously agreed with HMRC) of goods or services being provided. However, where goods or services are supplied before January 4 businesses can choose to charge the VAT at the old rate of 17.5 per cent.
If a business receives a purchase invoice dated on or after January 4 which shows the VAT at 17.5 per cent, only the actual amount shown can be reclaimed.
HMRC say consumers should be aware that although the 20 per cent VAT rate should be charged on all standard-rated sales from January 4 onwards, there will be occasions when they might be charged at the current 17.5 per cent rate. If in any doubt as to whether this is correct, they should contact the vendor for an explanation.