VAT’s the way to do it

HM Revenue and Customs director of VAT Jim Harra is telling businesses to be on the ball to make the necessary changes to book-keeping and accounting systems now that the new 20 per cent VAT rate has come into force.

Retailers must charge the new 20 per cent rate on all standard-rated takings received on or after January 4, but if a customer pays on or after that date for something they take away (or have delivered) before January 4, the sale takes place before the rate change and the 17.5 per cent rate should be used.

Retailers who use electronic tills must have the correct VAT rate shown on till receipts. If a business receives a purchase invoice dated on or after January 4 which shows the VAT at 17.5 per cent, only the actual amount shown can be reclaimed.

Consumers should be aware that although the 20 per cent VAT rate should be charged on all standard-rated sales from January 4 onwards, there will be occasions when they might be charged at the current 17.5 per cent rate. If in any doubt as to whether this is correct, they should contact the vendor for an explanation.

Visit www.businesslink.gov.uk/vatratechange for general information about the VAT rate change.