Changes in VAT are be introduced by H M Revenue & Customs in the coming months which will impact upon consumers and businesses alike.
The first change is that the standard rate of VAT will go back to 17.5% on 1 January 2010, from the current reduced rate of 15%. From a business perspective, this again means changing catalogues, brochures, price lists, menus, price labels, stationery, tills and online systems. Not too many businesses will want to have to be revising, reprinting & reprogramming during the immediate run up to Christmas, so it is worth planning ahead.
H M Revenue & Customs have issued lengthy guidance on dealing with the change, including special provisions covering the situation if you make sales that span the change in rate. You should contact your tax advisor for guidance if you are in any doubt over how the change will affect you or how to deal with any aspect of it.
For consumers, there is a small price advantage to be gained by making a purchase before the end of the year, while the VAT rate remains at 15%. For most purchases the difference is not all that large, e.g. an item priced at £100 plus VAT would cost £115 now compared with £117.50 in the New Year, so the saving on goods at that value would only be £2.50 for buying before 1 January.
However, if you happen to be expecting to purchase a particularly expensive item which is subject to VAT, you would make more of a saving by buying before the end of the year, e.g. an item priced at £5000 plus VAT would cost £5750 now compared with £5875 in the New Year, so the saving would be £125.
The other change coming is that H M Revenue & Customs are phasing out paper VAT Returns. From April 2010 businesses with an annual turnover of over £100,000 will have to submit their VAT Returns online and pay any VAT due electronically. This will apply to all businesses registering from April 2010 onwards as well.
If your turnover is below £100,000, then you won't need to do online Returns yet, but this is likely to change in 2012 and you can choose to use the online service sooner if you wish.
Businesses which will have to submit Returns online will receive a letter from H M Revenue & Customs in February 2010. However, if you expect to have to submit your Returns online from April, then it is advisable to take action now by taking the following steps:-
Details of these changes can be found on the H M Revenue & Customs website or talk to your tax advisor.