From 1 December 2008, the standard rate of VAT is reduced from 17.5% to 15%. The reduction will last until 31 December 2009, after which the standard rate will return to 17.5%. The reduced and zero-rates are unaffected.
Tax point issues
The 15% rate must be charged on standard rated supplies of goods and one-off services made on or after 1 December 2008. For details of how to deal with payments received or invoices issued using the 17.5% rate before 1 December 2008 for goods or services that will be provided after 1 December 2008, along with how to account for continuous supply of services (solicitors, accountants etc), and information for landlords, follow the link to the full article below (and get a preview of our new website).
Accounting/operational changes
For information about the impact on retailers, small businesses which are not VAT registered, charities and partly exempt businesses (who are unable to recover all VAT on costs - eg finance/ insurance), follow the link below.
New VAT fraction
All businesses should ensure that where VAT is calculated from a VAT inclusive figure (income or expenditure - eg mileage rates paid to employees) the new ‘VAT Fraction’ is used - this will be 3/23 rather than the current 7/47 from 1 December 2008.
Flat Rate Scheme (FRS)
Following the change in the standard rate of VAT, a new table of rates for the FRS will be effective from 1 December 2008. Contact Alan Davis for a copy of the new rates.
VAT accounting using Sage
Sage recommend that from 1 December the T1 tax code is edited to 15%. For processing supplier invoices dated in November after the editing, the user will have to manually amend the VAT value as the system should automatically calculate at 15%. For full instructions on how to make the necessary changes see the link below.
