| Temporary
change of standard rate
The
Chancellor has confirmed that the temporary reduction in the
standard VAT rate to 15% will end on 31 December 2009.
From
25 November 2008 there are rules to counter ‘forestalling'
schemes that aim to apply the 15% rate to goods or services
supplied after 31 December 2009. Forestalling works by the
supplier issuing an invoice or receiving payment before the
rate rises. A supplementary 2.5% VAT will be charged where
the customer cannot recover all the VAT on the supply and
one of the three following conditions is met. These are that
the supplier and customer are connected, the supplier funds
the purchase, or a VAT invoice is issued where payment is
not due for at least six months.
There
will also be a supplementary charge on certain prepayments
of more than £100,000 made before the rate rise for
goods or services to be supplied after 31 December 2009, unless
the prepayment is in accordance with commercial practice.
This rule has effect after 30 March 2009.
Think
ahead
Consider
switching to the flat rate VAT scheme for small businesses
if your business has few costs and overheads, and your turnover
is less than £150,000 a year. The VAT you pay is calculated
by multiplying your gross sales by a flat rate determined
by your business sector. Purchases are ignored, so the scheme
is very simple to use. |