VAT CHANGES IN 2010
There are numerous changes in VAT rules and deadlines which take effect from January 2010 which you and your business need to be aware of: The head of our VAT division Pat Strods guides us through these.
Back to 17.5%
The rate of VAT goes back to 17.5% on 1 January 2010. HMRC have said they will allow a certain amount of flexibility during the transition. For example:
- Any goods invoiced or paid by 31 December 2009 will still be subject to 15% VAT, even if the goods are delivered to a customer on or after 1 January 2010. However, there are anti-avoidance rules that may apply an additional 2.5% charge if the value of the goods exceeds £100,000 or the invoice is payable more than six months after it is raised, but these situations will be limited.
- If you or your clients supply services on a continuous basis (like us) the VAT is normally due according to the rate in force when you raise an invoice or receive money from your client. However, if an invoice raised or payment received on or after 1 January 2010 includes work done before that date, then 15% VAT can still be charged on the value of that work. The 17.5% VAT rate will only be charged for work carried out on or after 1 January 2010.
Compulsory filing of VAT returns online
HM Revenue & Customs plans to phase out paper VAT Returns from April 2010. After that date, if your turnover is over £100,000 – or if you are newly VAT registered – you will have to submit your return online and pay VAT electronically.
EC Trade
January 2010 sees a number of changes in rules where trade with EC member states are involved:
1. Recovery of VAT incurred in other member states of the EC
Currently if you incur VAT in another EC member state a claim for refund has to be made directly to that member state. From January 2010 UK established businesses will be able to submit claims for refund to HMRC electronically and not to the member state where the cost was incurred, simplifying the claim.
In addition the period of time in which the claim has to be made will be extended to 9 months (currently 6) from the end of the calendar year in which the VAT was incurred. And the time allowed to HMRC to make the refund will be reduced from 6 months to 4.
2. Place of supply rules
From January 2010 there will be changes to the place of supply of service rules. The place of supply rules determine the country where a supply of services is made and where any VAT is payable. They also determine whether, if VAT is due on a supply, it should be accounted for by the supplier of the service or their business customer.
The new rules aim to ensure that, as far as possible, VAT is due in the country in which the service is consumed (e.g. where the customer is established) rather than where the supplier is established.
3. New time of supply rules
From January 2010 there will be new rules in place at which point businesses account on their EC Sales lists for services to EC member states.
4. EC Services
From January 2010 any UK business that supplies services to other EC member states will be required to include these on the EC Sales Lists for each calendar quarter.
5. Change in deadline for submission of EC Sales lists
From January 2010 the deadline for the submission of EC Sales listings will be shortened from the current 6 weeks to 14 days for paper returns and 21 days if filing online.
If you need further help or clarification please contact Pat Strods
