VAT rate change -
1 January 2010
After the implementation of the reduction in the VAT rate to 15% on 1 December 2008 the rate will change back to 17.5% on 1 January 2010.
In summary the treatment of VAT relating to this change will be:
- any work completed before 1 January 2010 will be subject to VAT at 15%
- any work spanning 1 January 2010 can either be subject to VAT at 17.5% on completion or split between that portion up to 31 December 2009 at 15% and 17.5% thereafter
- any work invoiced or paid for before 31 December relating to services after 31 December 2009 will be subject to VAT at 15%.
The rate change is the last point which HMRC has sought to limit in scope. Apart from obvious transactions arranged between connected parties, any prepayment for services over £100,000 where this practice is not the norm will be subject to an additional 2.5% supplementary charge. However there is still some room for manoeuvre which practices might use as a selling point to clients in the UK who cannot recover their VAT in full e.g. charities, financial institutions and private clients.
For more information on this please contact our VAT team or click here for more information on our VAT services.
