From January 4 2011 the standard rate of VAT increases to 20%. If you are VAT registered then you must start charging VAT at 20% from 4 January 2011 for Supplies of standard rated goods and services made on or after 4 January 2011.
There are no changes to sales which are zero rated, or reduced rated or exempt for VAT.
Sales that span the change in rate
Goods or services provided before 4 January 2011 where a VAT invoice is raised after that date: you can choose to charge VAT at either the old 17.5% or at the new 20% rate. You don’t need to tell the Taxman which you opt for.
Services started before January 4 2011 but finished afterwards
Where you start work on a job before 4 January 2011 but finish afterwards you can account for the work done up to January 3 2011 at 17.5% and the remainder at 20%. If you choose to this then you will need to demonstrate with evidence of how you worked out which supplies were charged at which VAT rate
Continuous supplies of services
Where you make a continuous supply of services, for example leasing equipment, you account for the VAT due whenever you issue a VAT invoice or receive payment, whichever is the earlier. You must charge 20% on invoices you issue and payments you received on or after January 4 2011. You may, if you wish, charge 17.5% on the services you’ve provided in the period up to 4 January 2011 and the remainder at 20%. If you choose to this then you will need to demonstrate with evidence of how you worked out which supplies were charged at which VAT rate
Invoices issued and deposits received before January 4 2011 for sales you made afterwards
Where you issue a VAT invoice or receive an advance payment (deposit) before January 4 2011 for goods or services which you supply on or after that date, VAT will usually be due at 17.5%. If HMRC suspects tax avoidance VAT is due at a rate of 17.5% on the date of issue of the VAT invoice or receipt of payment before 4 January 2011 and a supplementary charge of 2.5% then becomes due on the 4 January 2011.
If you’re a retailer you must charge 20% VAT on takings which you receive on or after January 4 2011. But if your customer pays on or after January 4 2011 for something they take or you deliver before January 4 2011, you should charge 17.5% VAT.
Flat rate scheme
Where you operate the flat rate scheme, the flat rate percentages have been re-calculated to reflect a standard rate of VAT of 20%. These percentages apply to supplies you make on or after January 4 2011. The new rates are shown in the table below.
Note, you can choose to operate the flat rate scheme if your VAT-exclusive turnover does not exceed £150,000. This is not affected by the change in the rate of VAT. However the turnover threshold for leaving the scheme has been increased to £230,000 including VAT.
For detailed guidance refer to HMRC’s guide to VAT rate change
Flat rate scheme percentages
These following rates will apply from January 4 2011 until further notice.
|Accountancy or book-keeping||14.5|
|Any other activity not listed elsewhere||12|
|Architect, civil and structural engineer or surveyor||14.5|
|Boarding or care of animals||12|
|Business services that are not listed elsewhere||12|
|Catering services including restaurants and takeaways||12.5|
|Computer and IT consultancy or data processing||14.5|
|Computer repair services||10.5|
|Dealing in waste or scrap||10.5|
|Entertainment or journalism||12.5|
|Estate agency or property management services||12|
|Farming or agriculture that is not listed elsewhere||6.5|
|Film, radio, television or video production||13|
|Forestry or fishing||10.5|
|General building or construction services*||9.5|
|Hairdressing or other beauty treatment services||13|
|Hiring or renting goods||9.5|
|Hotel or accommodation||10.5|
|Investigation or security||12|
|Labour-only building or construction services*||14.5|
|Laundry or dry-cleaning services||12|
|Lawyer or legal services||14.5|
|Library, archive, museum or other cultural activity||9.5|
|Manufacturing that is not listed elsewhere||9.5|
|Manufacturing fabricated metal products||10.5|
|Manufacturing yarn, textiles or clothing||9|
|Mining or quarrying||10|
|Real estate activity not listed elsewhere||14|
|Repairing personal or household goods||10|
|Retailing food, confectionary, tobacco, newspapers or children’s clothing||4|
|Retailing pharmaceuticals, medical goods, cosmetics or toiletries||8|
|Retailing that is not listed elsewhere||7.5|
|Retailing vehicles or fuel||6.5|
|Sport or recreation||8.5|
|Transport or storage, including couriers, freight, removals and taxis||10|
|Wholesaling agricultural products||8|
|Wholesaling that is not listed elsewhere||8.5|