VAT INCREASE By: Clare

The standard rate of VAT increases to 20% from 4 January 2011, with the new VAT fraction being 1/6th.  The usual tax point rules still apply, so whichever is earlier – the date of the invoice or the date of payment will determine the VAT rate to use.  HMRC have issued some anti-forestalling legislation to stop blatant avoidance.

The anti-forestalling legislation will apply when various events occur, including, if you receive a pre-payment from persons connected to you for future supplies, or you issue VAT invoices, which do not have to be paid for at least six months.  These will automatically incur a charge of the new rate of 20% VAT.

HMRC have produced detailed guidance at http://www.hmrc.gov.uk/vat/forms-rates/rates/rate-increase.htm.

For additional guidance please call Haxton Chartered Accountants West London.