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VAT update

November 2009

VAT rate increase on 1 January 2010

The current temporary reduction in the standard rate of VAT businesses can choose to apply special transitional rules.
will end on 31 December 2009. With effect from 1 January These rules deal with supplies which span the rate change
2010, the VAT rate will revert back to 17.5%. HMRC has and how to treat deposits, pre-payments etc.
recently announced that retail businesses remaining open
past midnight on New Year's eve will be allowed to continue Anti-forestalling legislation was introduced in the Finance Act
charging VAT at 15% on their sales until they close or until 2009 to prevent abuse of the increase in the VAT rate, eg
6.00am on 1 January 2010. There has been press making unusually large prepayments. However, these rules
speculation that the rate could be increased to 18% or 19%, should not affect the majority of normal business
to generate much needed revenue for the Government. At transactions.
the time of going to print, this remains speculation.
HMRC have published detailed guidance on their website to
Businesses should ensure that they are ready for the assist businesses to deal with the change and have set out
change. Systems may have to cope with both VAT rates full details of the anti-forestalling rules. The good news is
during the transitional period, for sales and purchases. that they have indicated that they will apply a 'light touch' to
any errors made in the first VAT return submitted after the
The normal tax point rules will determine which VAT rate to change in rate.
apply to supplies of goods and services, however,

Cross border changes

In our January 2009 VAT update, we reported on some ESLs for goods will also be subject to a number of changes
proposed changes to cross border transactions involving from 1 January next year:
both suppliers and recipients of cross border services.
These changes will come into effect on 1 January 2010. • For quarterly value of supplies of intra EU goods above
£70,000 (based on previous four calendar quarters), the
The main change will be to the place of supply of business reporting period will be one month (currently quarterly).
to business supplies of services. The general rule will be
that the place of supply of such services will be where the • For quarterly value of supplies of intra EU goods below
customer is established (and not as now, where the supplier £70,000, the reporting period will be calendar quarterly.
is established). As always, however, there will be exceptions
to the general rule (land, hiring of certain means of transport
and cultural, sporting, scientific and educational services). However, a business can opt to file both ESLs monthly.
The VAT rules for business to consumer supplies will remain Filing can be on paper or electronically. The filing deadline
unchanged for now. for the paper option will be 14 days from the period end and
21 days for electronic filing. The current form VAT 101 will
The time of supply for reverse charge services will change be used for both goods and services (indicator code 3 for
from the invoice date to the earlier of: services).

• Businesses should now be considering how the new rules

completion of the service, or
will affect them and what changes may be needed to capture
• the receipt of payment. the relevant data. The first stage will be to obtain overseas
customers’ VAT numbers.
EC Sales Lists (ESLs) currently required for Intra EU
supplies of goods to VAT registered customers will also be
required for Intra EU supplies of services, covered by the
general rule and where the customer is required to account
for VAT under the reverse charge procedure. Also featured in this issue:
ESLs for services will have to be reported on a calendar
quarterly basis. • Online VAT returns - a reminder

• Agent update
Cross border changes (...continued)

Businesses which pay overseas VAT and currently submit Gateway and forwarded onto the Member State of Refund
refund claims to overseas tax authorities should be aware (MSR). New deadlines have been set both for submission
that a new electronic refund system will also be introduced and refund of the claim. Further details are available on
from 1 January 2010. The main change is that claims will HMRC's website.
now be submitted via a UK portal on the Government

Online VAT returns - a reminder

The deadline for compulsory online filing of VAT returns is • Telephone banking
nearly upon us. With effect from 1 April 2010, all businesses
with a turnover above £100,000 and all newly VAT registered • Debit/Credit card over internet using Billpay
businesses will have to submit VAT returns online and pay by
electronic means. Businesses with a turnover below • BACS direct credit
£100,000 can continue to file paper returns until 2012.
The current ways to pay electronically are:
• Bank giro credit transfer (cash or cheque at certain
• Direct debit banks/building societies).

• Internet banking Some of these electronic payment methods allow extra time
(seven days) to file and pay the return.

Agent update
Currently businesses wishing to authorise an agent to deal authorisations via the online service (Online Agent
with their VAT affairs have to complete a form 64-8 and Authorisation Service) currently available for other taxes. It
submit this by post to HMRC. HMRC have recently is anticipated that this service will be available from late
announced it will soon be possible to deal with VAT November 2009.

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