Updates
Change in the rate of VAT
The standard rate of VAT increases from 17.5% to 20% with effect from 4th January 2011.
All invoices dated on or after that date should bear the new rate of VAT.
The VAT fraction changes from 7/47 to 1/6. Use this fraction to calculate the amount of VAT in any VAT-inclusive price. For example, if you have a VAT inclusive price of £1.20, the amount of VAT is 1/6 of this, 20p.
As with previous changes in VAT rates there are a number of anti-avoidance provisions to prevent tax avoidance by invoicing in advance, receiving payment in advance, et cetera.
If you provide services on a continuous basis which spans 4 January 2011 you can time apportion your invoice between the period up to that date and the period after that date and invoice at the appropriate VAT rates, but if your customer is VAT registered there is no advantage in doing this and it would be easier (and acceptable to H.M. Revenue & Customs) to charge VAT at 20% on the whole invoice.
How the change in rates will affect you
Please click on the link appropriate to your circumstances:
VAT registered and:
Using cash accounting but not the FRS
Using cash accounting and the FRS
