Increase in the standard VAT rate
The standard rate of VAT was temporarily reduced to 15 per cent on 1 December 2008 and it will return to 17.5 per cent on 1 January 2010.
For any sales of standard-rated goods or services that you make on or after 1 January 2010 you must charge VAT at the rate of 17.5 per cent. If you have a cash business and calculate your VAT using the VAT fraction you must revert to the VAT fraction of seven fortysevenths from 1 January 2010.
The change only applies to the standard VAT rate. There are no changes to sales that are zero-rated or reduced-rated for VAT. Similarly, there are no changes to the VAT exemptions. Any sales you make at these rates are unaffected by this change.
This guide tells you how to account for the change to the standard rate of VAT. It also tells you where you can get further information.
How to account for the VAT rate change
The way that you should account for the change in the VAT standard rate depends upon the type of business you have.
Retailers
If you are a retailer you must use the 17.5 per cent rate for all takings that you receive on or after 1 January 2010. But if your customer pays after 1 January for something they took away (or you delivered) before 1 January 2010, your sale took place before 1 January 2010 and you should use the 15 per cent rate.
Businesses that issue VAT invoices
You must use the 17.5 per cent rate for all VAT invoices that you issue on or after 1 January 2010.
Businesses operating beyond midnight on 31 December 2009
Special arrangements have been set up to help you account for the change in the VAT standard rate, if you are:
- a pub, club, restaurant or similar establishment
- a retail shop
- a provider of telecommunications
and your business will be operating beyond midnight on 31 December 2009.
To find out more information please visit the HMRC web site.
