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Guide to VAT rate change to 17.5% on 1 January 2010

Posted by: admin on November 3rd, 2009

All standard rated goods or services sold from 1 January 2010 onwards will need to be charged with the VAT rate of 17.5%. 

However, using the change of rate rules, the 15% VAT standard rate can be used if you sold goods or services before 1 January 2010 but did not raise the sales invoice until after this date.  HM Revenue & Customs (HMRC) do not need to be notified if you do this. 

The same principle works for purchase invoices.  So if you receive a purchase invoice after 1 January 2010 for goods or services received before 1 January 2010 you should expect an invoice with 15% VAT.  If you receive purchase invoices after 1 January 2010 that you believe to be incorrect you should contact the supplier to arrange a credit note and a new purchase invoice with the correct VAT rate included.  Please note that you can only claim VAT at the amount shown on the invoice.

 Accounting software will need to be updated to deal with the VAT rate change.  Each software company should issue some guidance on how to make the necessary changes.

 The VAT on fuel scale charges will need to be adjusted to take account of the 17.5% rate from 1 January 2010.  The VAT payable on the scale charges will need to apportioned accordingly if your VAT return period spans 1 January 2010.

 Flat rate percentages will change from 1 January 2010. HMRC state that further details will be available towards the end of 2009.

 Anti avoidance legislation is in place to stop arrangements being made to account for the 15% VAT rate in advance of 1 January 2010 relating to goods or services to be provided afterwards.

 Please contact us if you have any questions regarding the standard VAT rate change to 17.5% on 1 January 2010.

Filed under: VAT