Summary on VAT issues following the pre-Budget Announcement on 24 November 2008

The standard rate of VAT will be 15% with effect from 1 December 2008. No other rates are affected. The 17.5% will be restored on 1 January 2010.The new VAT Fraction to calculate VAT included in a cost is 3/23rds.

Cash Accounting Scheme: Note that the CAS only delays the time when VAT is paid to Customs and does not change the ‘tax point’. This means that if the supply had a pre-1.12.08 tax point then VAT will be at 17.5%.

Flat Rate Scheme: New rates are now published and in most cases have been reduced. Although a quick calculation shows that the ‘benefit’ may have been reduced, of course the business will suffer less VAT on costs so overall the position should be neutral. The new rates apply from 1 December.

Motor Fuel Charges: New scales have been published to recognise the new VAT rate.

Credit Notes: Credit notes reflect changes to an invoice and so should carry the same VAT rate as the invoice did.

Sales spanning rate change: There are special rules which allow for adjustment to be made if goods or services are not actually supplied until after 1 December 2008 but where any VAT has been accounted for on invoices or payments received prior.

Tax Points: Be aware that if goods or services were supplied more than 14 days pre 1 December then where the 14 day rule applies VAT will be due at 17.5%.

Coin-op machines: These should be accounted for using the new rate from 1 December so will need to be totalled up to that date (or otherwise apportioned).

If you would like further advice please call Andy Scott us on 0118 923 5807.