Chamber patron, Wheawill and Sudworth, has put together some useful guidance notes for dealing with the increase in VAT.
The standard rate of VAT will increase for most transactions that take place on or after 4 January 2011. From this date onwards, the new rate will be 20% rather than 17.5%.
• The VAT fraction to work out how much VAT is within an amount will now be 1/6 rather than 7/47
• For goods and services supplied before 4 January 2011, VAT can be charged at 17.5% even if the invoice is dated later
• For invoices issued or payments received before 4 January 2011 relating to supplies after that date, VAT can either be left at 17.5% or be charged at 20% at the discretion of the supplier
• HMRC have anti-avoidance powers for larger transactions accounted for earlier than normal to beat the higher rate of VAT so care is needed here
• Services spanning before and after 4 January 2011 can either be invoiced wholly at 20% VAT or can be divided into pre and post change with VAT then levied at the appropriate rates
• On a credit note, VAT should be credited at the same rate as on the original invoice
• VAT has been recalculated on the standard fuel scale charges used to account for VAT on fuel used for private motoring
• New percentages apply for the Flat Rate Scheme but not all rates have increased by 2.5%
For further details and a free copy of a guide to the changes, please e-mail David Butterworth of Wheawill & Sudworth, Chartered Accountants, at firstname.lastname@example.org