Happy New Year - Standard Rate VAT increases to 20%
We'd like to start by wishing everyone a Happy and Prosperous New Year.
However, in view of the increase in Standard Rate VAT which came into effect from today, it may be a happier and more prosperous year for the government rather than businesses.
For non VAT registerd businesses the increase of 2.5% is an additional cost. VAT registered businesses will reclaim the addition cost, but there will be an impact on cashflow for some businesses, depending on the VAT scheme in use.
The change only affects the Standard Rate of VAT - other rates remain the same, and there is no change to the scope of goods and services VAT applies to. There are no changes to sales that are zero-rated or reduced-rated for VAT. Similarly, there are no changes to the VAT exemptions. Any sales you make at these rates are unaffected by this change.
The new rate became effective from midnight 3rd January.
For any sales of standard-rated goods or services that you make on or after 4 January 2011 you must charge VAT at the new 20 per cent rate.
If you have a cash business and calculate your VAT using the VAT fraction you must use the VAT fraction of 1/6 on your standard-rated VAT inclusive sales from 4 January 2011.
Click here to download our FREE VAT Calculator
Visit the HMRC VAT web site to read more
If you use the Flat Rate Scheme check the new rates here
Need help or guidance? Then feel free to contact us.