Changes to the standard rate of VAT - Dec 2008

Changes to the standard rate of VAT for the period 01/12/08 - 31/12/09:

  • change of rate from 17.5% to 15%
  • change in VAT fraction from 7/47 to 3/23
  • zero rated/reduced rated and exempt supplies not affected
  • cash accounting and annual accounting schemes are not affected
  • Flat rate scheme percentages are being revised to reflect the change and these should be used with effect from 01/12/08
Business making mainly cash sales to non-VAT registered customers Use the new rate for all takings you receive on or after 01/12/08, except:
  • where your customer pays for something they took away before 01/12/08
Business making sales mainly to other VAT registered business Use the new rate for all invoices you issue on or after 01/12/08, except:
  • where you provided goods/services more than 14 days before you issue a VAT invoice, or
  • where you were paid before 01/12/08
Business making continuous supplies such as ongoing construction work You should account for VAT due on the earlier of issue of a VAT invoice or receipt of payment. Invoices issued or payments received on or after 01/12/08 will be subject to the new rate.
Invoices issued or payments received before 01/12/08 for goods/services to be provided after 01/12/08 You can account for VAT at the new rate. You will need to issue a credit note to your customer if you have already issued a VAT invoice at the old rate.
Claiming back VAT on invoices You can reclaim VAT in the usual way. Where an invoice has been received showing the old rate of VAT relating to purchases you made before 01/12/08 you can claim back the 17.5%.

Changes to computerised accounting software-if you require a helpsheet or further information please contact Louise Donnison.

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