There is now barely a month remaining before the standard rate of VAT climbs from 17.5 per cent to 20 per cent. The increase means that any sales of standard-rated goods or services made on or after 4 January 2011 must carry a VAT charge of 20 per cent. The increase only covers standard-rated goods and services. Zero-rated (0 per cent) and reduced-rated sales (5 per cent) will see no change, nor will exempt goods.
There will, inevitably, be concerns among firms about the rules that apply to sales made before 4 January but payments made after that date. If you are not sure about charging the correct amount of VAT, do check with us.
Tips on preparing for the change
It is important to make sure that books are kept in good order, particularly for sales that span the transition period. And to ensure that any accounting software is updated to accommodate the new rate.
Retailers need to adapt their till systems so that the VAT increase is made automatic on or after 4 January.
If a business is planning the purchase of a major item, then it might be advisable to buy before 4 January.