12 November 2009

VAT back advice

Kendall Wadley Accountants in Worcester, Malvern and Hereford are advising clients and local businesses ahead of the VAT rates reverting back to 17.5 per cent from 1 January 2010.

For the past 12 months, VAT rates have been at the temporarily reduced 15 per cent rate, but the Government’s New Year date to revert back will mean administrative changes which businesses need to be ready for, advises Kendall Wadley.

In keeping with the festive timing to the reverted rates, clubs, pubs and restaurants will be allowed to keep the 15 per cent VAT rate until 6.00am on 1 January to accommodate the new year drinkers and avoid retail complications as customers eat and drink!

Kendall Wadley Partner Liz Needham explains some of the main areas in which businesses need to be clear: “Once the New Year celebrations are over, and for all other businesses issuing VAT invoices after 1 January, they should be at 17.5 per cent, unless the goods/services were supplied before the rate change. You can then choose to charge at 15 per cent. And for the supply of services that span the change period, you can charge 15 per cent for those services provided before the change, 17.5 per cent afterwards, or you can charge for all services at 17.5 per cent,” Liz says. Suppliers issuing invoices prior to the rate change, but where delivery will take place after the 1 January, may charge VAT at 17.5 per cent. Liz Needham and the Kendall Wadley team are advising clients to maximise sales in December, to encourage customer spending at the lower VAT rate before it goes back up to 17.5 per cent - ensuring goods are not only invoiced and paid for before 1 January 2010 but actually supplied to the customer! Liz also alerts those businesses on the cash accounting scheme (where VAT is accounted for when payment is received): “If the supply is before 31 December this year but paid for after, then VAT is payable to Customs at 15 per cent not the new rate of 17.5 per cent.”

Quotes and estimates for work to commence after 1 January should quote the 17.5 per cent rate, and those customers willing to pay before the New Year date can be charged at the current 15 per cent, subject to Customs and Excise’s anti-forestalling legislation. Kendall Wadley’s Liz Needham adds: “Refunds or credit notes should be dealt with at the same rate originally declared or invoiced, and invoices issued for 12 months in advance, must show VAT at 15 per cent for all monthly payments up to 31 December 2009. All payments after that date must be at 17.5 per cent.”

“In a nutshell, the normal tax point rules take precedence,” she adds. “Businesses need to be prepared to adjust their systems back and keep up to date with the changes from HMCE who have issued some anti-forestalling legislation to stop blatant avoidance.”

For further information on the auditing, accountancy and taxation services provided by Kendall Wadley Chartered Accountants, please call 01684 892666 or visit www.kwca.co.uk.

For further press information, please contact Caroline Leah, Tel: 01905 820644, email: caroline@carolineleahpr.com