HM Revenue and Customs have issued guidance for businesses unsure how to tackle the changed rate of VAT from 17.5% to 15% from Monday.
Businesses taking cash for any goods should use the new rate on all cash takings from December 1, unless the cash is for goods taken away before December 1 2008. In these circumstances the old rate applies.
For businesses that sell mainly to other VAT registered businesses and have to issue VAT invoices, the new rate applies to all invoices issued on or after December 1 unless the goods or services were supplied more than 14 days before you sent the invoice was sent.
HMRC believe that most till packages and accounting software will be able to accept the new 15% rate without any difficulty otherwise business will need to contact their software supplier. HMRC say they will be supportive of businesses making the change and won’t expect them to put everything in place overnight.
With regards to VAT returns, when the period covered by the return crosses over the December 1 2008 whoever is doing the return simply adds the VAT on sales at the old rate to the VAT onto the new rate. This total goes into Box 1 of the VAT return.
If you’ve a payment has been received or an invoice sent out before December 1 for goods/services which will be delivered after December 1 then the business can choose to pay VAT at the new rate on the amount already received or invoiced, simply issuing a credit note for the overpayment to the customer.
More details are available from HRMC’s website