VAT changes in 2010
The start of 2010 is set to be a busy time for VAT registered businesses, particularly those involved in cross border supplies of goods and services.
The current temporary VAT rate of 15% will revert back to 17.5% for supplies of goods and services made on or after 1 January 2010. As always, this is not necessarily as simple as it sounds, as there are special rules for supplies which span the date of the change and deposits/prepayments etc.
That said, there is a cashflow opportunity for businesses if they can encourage customers to pay in full before 1 January for goods and services to be provided after the increase. (However, please note that this is subject to anti-forestalling legislation which will affect certain transactions).
With effect from 1 January 2010, there will also be a number of important changes for businesses supplying goods to other EU countries and also for those supplying or receiving cross border services, These changes involve three aspects; the place and time of supply of certain services, and changes to the EC Sales Lists rules (currently only required for cross border supplies of goods but will be extended to include services). If you are involved in cross border transactions, now is the time to consider if and how the changes will affect your business and what needs to be done in order to comply.
Businesses which submit VAT refund claims for VAT incurred in other countries, will have to do so using a new EU electronic system being introduced on 1 January 2010. The new system has revised time limits and procedures for submission and repayment of the claims. In order to use the service, UK businesses will need to register online via the UK portal and this service is expected to be available from late November. HMRC will announce further details in due course. Whilst the UK is prepared for the new system, it is possible that certain EU countries may not be fully ready.
We have already reported in previous blogs that online filing of VAT returns and electronic payment will become compulsory from 1 April 2010, for all new VAT registrations and businesses with an annual turnover above £100,000. Businesses with a turnover below £100,000 can continue to use paper returns until these are phased out in 2012.
Further details and guidance on all of these changes can be found at HMRC’s website. HMRC will also be writing to businesses to inform them of the changes.
HMRC have said that they understand that this will be a difficult time for businesses and so they intend to adopt a 'light approach' to any errors made immediately after the implementation of these changes. Whether this happens in practice remains to be seen.
Jane Stacey is a VAT adviser and a senior manager at Mercer & Hole. The views given in this blog are personal to the author, if you would like to discuss the contents of this blog with Jane you can call her on 01727 869141.
Date: 27th October, 2009
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