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.
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There are no changes to sales which are zero rated, or reduced rated or exempt for VAT.
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Sales that span the change in rate
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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.
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Services started before January 4 2011 but finished afterwards
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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
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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
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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.
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Retailers
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.
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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.
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Further reading
For detailed guidance refer to HMRC’s guide to VAT rate change
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Flat rate scheme percentages
These following rates will apply from January 4 2011 until further notice.
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Business category | Percentage applicable |
Accountancy or book-keeping | 14.5 |
Advertising | 11 |
Agricultural services | 11 |
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 |
Financial services | 13.5 |
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 |
Management consultancy | 14 |
Manufacturing that is not listed elsewhere | 9.5 |
Manufacturing fabricated metal products | 10.5 |
Manufacturing food | 9 |
Manufacturing yarn, textiles or clothing | 9 |
Membership organisation | 8 |
Mining or quarrying | 10 |
Packaging | 9 |
Photography | 11 |
Post offices | 5 |
Printing | 8.5 |
Publishing | 11 |
Pubs | 6.5 |
Real estate activity not listed elsewhere | 14 |
Repairing personal or household goods | 10 |
Repairing vehicles | 8.5 |
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 |
Secretarial services | 13 |
Social work | 11 |
Sport or recreation | 8.5 |
Transport or storage, including couriers, freight, removals and taxis | 10 |
Travel agency | 10.5 |
Veterinary medicine | 11 |
Wholesaling agricultural products | 8 |
Wholesaling food | 7.5 |
Wholesaling that is not listed elsewhere | 8.5 |
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