Specialist Tax News

VAT Increase From 4 January 2011

The new 20% standard rate applies to goods or services to be delivered or performed on or after 4 January 2011.

Anti-forestalling rules will apply to artificial arrangements involving a VAT invoice being issued, or payment being made in advance, where the goods or services are not due to be delivered or performed until on or after 4 January 2011.

It creates a supplementary charge to VAT at 2.5% where the customer cannot recover all the VAT and at least one of the following conditions are met:

  • the suppler and customer are connected persons
  • the value of the supply, and any related supplies made under the same scheme, exceeds £100,000 unless the prepayment or issue of an advance invoice is normal commercial practice
  • the supplier or connected person funds a prepayment for the goods or services
  • an advance VAT invoice is issued where payment is not due in full within 6 months (except HP invoices issued in accordance with normal commercial practice)

Flat rate scheme

The percentages are recalculated to reflect the VAT increase to 20%. The new rates need careful scrutiny and we can undertake that exercise for you.

This scheme is available to a VAT-registered business with annual turnover up to £150,000.

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