Newsletter

Increase in the standard rate of VAT

The standard rate of VAT will increase from 17.5% to 20% from 4 January 2011. The reduced rate of 5% and the zero rate will remain unchanged. Businesses need to ensure that they are ready for this change. 

For any sales of standard rated goods or services that take place on or after 4 January 2011 businesses should charge VAT at the new rate of 20%.

This means that businesses currently calculating their VAT using the VAT inclusive fraction of 7/47 should, from 4 January 2011, use the new VAT fraction of 1/6.

There are many rules which determine the correct rate of VAT to apply.

Goods/services provided before the change

The new rate generally applies to all VAT invoices issued by a business on or after 4 January 2011. However, where a business issues an invoice on or after 4 January 2011 and the goods or services were provided prior to 4 January 2011, the business may apply VAT at 17.5%.

Goods provided after the change

If a business has received a payment or issued an invoice before 4 January 2011 but the goods will be provided (or services delivered) after 4 January 2011 then the supplier has a choice, either:

  • to leave the VAT charged at 17.5%; or
  • to account for VAT at the new 20% rate.

Electronic tills and accounting software

Electronic tills and accounting software will also need to be adjusted to reflect the new rate. This will be a particular issue for those tills which are set up to provide VAT information.

Most accounting software packages do have a facility to change the rate of VAT or create an additional rate of VAT.  It may be preferable to create a new 20% rate, rather than delete the 17.5% rate, as some businesses (especially those who use cash accounting) will need the old standard rate for certain transactions for some time to come. 

HMRC have issued lots of guidance which can be found at the link below.  If you would like help dealing with the change please do get in touch.

Internet link: HMRC guidance



Our other services...

Financial Accounts Financial Accounts

We can help with the preparation of accounts for all types of business. Whether you are a Sole Trader, Partnership, Limited Company, Limited Liability Partnership or a Charity, AGP has the expertise to deal with you. We help you fulfil all your obligations with HMRC, Companies House and any other regulatory body that you are required to report to.

Audit Audit

An audit provides a high level of independent assurance of the financial position and results of an organisation. This gives shareholders confidence that the reported performance of the business is accurate as well as providing external users with certainty that the accounts show a true and fair view. An audit lends credence to the company accounts in a number of ways.

Tax Planning Tax Planning

It is important to ensure your tax planning reflects any changes to your circumstances which is why we work very closely with all our personal clients. AGP are trusted to manage tax efficiently. Sometimes just a simple review of your personal tax circumstances can reveal significant tax saving opportunities which can be realised quickly and at minimal cost..

Payroll Services Payroll Services

AGP can become your own part-time Payroll Manager. An expert who knows the complexity of the relevant legislation inside out and for a fraction of the cost of an internal manager. Why not outsource this obligation and spend the time saved doing what you do best, running your business?

Corporate Taxation Corporate Taxation

Corporation tax can be a huge outgoing for your company if it is not managed correctly and planned appropriately. You can trust AGP to employ a holistic approach to your tax planning whether you are a medium sized SME, an international organisation or a small owner-operator.

Management Accounts Management Accounts

Management accounts allow business owners to exert a far greater degree of control over their business, recognising and addressing problems and identifying opportunities soon after they arise.

Bookkeeping & VAT Bookkeeping & VAT

When running a business, priorities are often focused on the operational side of your business. Bookkeeping & administration can often be put off until it becomes quite a major task. By taking advantage of our bookkeeping service, we can take this problem away so you can get on with running your business while we manage your accounting books.

Company Formation Company Formation

We take away the hassle. Whether starting a new business or restructuring an existing one, our extensive knowledge of company formation means we can advise you on the merits and possible pitfalls of incorporation.

Contractor Accounts Contractor Accounts

We have a wealth of experience in the contractor market and as a result there are not many firms of Chartered Accountants that can claim they know the contractor industry as well as AGP. This leads to a number of benefits.