Changes to Flat rate VAT

[hrbs]

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Hi

A quick update on the VAT issues arising from today's Pre Budget Report.

The flat rate VAT percentage for advertising services reduces to 8.5% as of 1 December 2008. The first year discount of 1% off their flat rate percentage for those in the first year of VAT registration still applies.

For those of you whose VAT quarters are December or January, you will need to calculate your VAT bill based on the pre 1 December sales at the higher rate and the balance at the lower rate.

The full guide is available at http://www.hmrc.gov.uk/pbr2008/vat-guide-det.pdf , which includes guidance on how to change your prices for those of you who are retailers and calculate VAT as a % of the gross price. A 5 page Q&A is at http://www.hmrc.gov.uk/pbr2008/businessqa.pdf

As many of the networks use self billing and pay in the following month, you will need to make sure that the correct VAT rate has been used on your payment and that you use the correct VAT figure in your accounts.

To quote HMRC

I receive self billed invoices from my customers. How will the change in the standard rate of VAT from 1 December 2008 affect this self billing arrangement and is there anything I need to do?
The change in the standard rate does not change the rules of self billing. From 1 December 2008 most self billed invoices you receive from your customers will show VAT at 15%. However, you will need to check that the correct VAT rate has been shown and used to calculate the VAT on the self billed invoice, as this amount is the output tax that is due from you on the supply.

What if the self biller has charged the wrong rate?
If the incorrect rate of 17.5% has been used you will need to notify the customer who issued the self billed invoice to you, as they will need to issue a debit note for the self billed invoice and issue an amended self billed invoice to you showing the correct VAT rate and calculation.

As is usual when rates change, the first VAT returns under the new rates need to have quite a bit of care taken over them. This is especially true for those on the flat rate scheme and receive self bill invoices from the networks, as they need to identify the correct amount of VAT and the flat rate to apply.

If you do make an error, to quote HMRC

We will adopt a “light touch” in relation to errors or mistakes made in the first VAT return after the change. We want to help businesses get it right, not catch them out. So we’ll take into account the difficulties a business has faced in adjusting to the change.

Regards

Keith
http://HRBS.biz

[hirschnathan]

Seems as if not all is rosy Mrborrow.co.uk haulage companies loose out looks like the budget will once again make us 'very competitive'

[csn]

Seems as if not all is rosy Mrborrow.co.uk haulage companies loose out looks like the budget will once again make us 'very competitive'

eek - That's a lot of cash!