What rate of VAT do I charge?


CalendarAs expected, the 2008 Pre-Budget Report confirmed that the UK rate of VAT is to reduce from 17.5% to 15%, with effect from 1 December 2008. Over the coming weeks, VAT-registered businesses will need to ensure that they are charging VAT at the correct rate, and this is not always as simple as applying the rate in force on the date of the invoice. The detailed rules on the ‘time of supply’ (also called the ‘tax point’) are set out here, but for ease of reference the full table of possibilities is set out below.

In this table, the ‘Supply date’ is the date of the basic supply to the customer. For goods, this is the date you send them to the customer, or the date the customer takes them away, or the date you otherwise make them available for the customer to use. For services, this is normally the date when all work (except invoicing) is completed.

Supply date Invoice date Payment date VAT rate
Up to 16 November November November 17.5%
Up to 16 November November December 17.5%
Up to 16 November December November 17.5%
Up to 16 November December December 17.5%
Between 17 and 30 November November November 17.5%
Between 17 and 30 November November December 17.5%
Between 17 and 30 November December, within 14 days of supply date Before supply date 17.5%
Between 17 and 30 November December, within 14 days of supply date After supply date 15%
Between 17 and 30 November December, after 14 days of supply date Before supply date 17.5%
Between 17 and 30 November December, after 14 days of supply date After supply date 17.5%
December onwards November November Either rate
December onwards November December Either rate
December onwards December November Either rate
December onwards December December 15%

Assumptions

Due to the complexity of the VAT system, a few simplifying assumptions are necessary:

Any service does not form part of a continuous service (for example, the hire of equipment), for which special rules apply.

There is no written agreement in place with HMRC waiving the right to create a tax point by issuing an invoice within 14 days.

There is no written agreement in place with HMRC extending the 14-day period within which the tax point can be delayed by issuing the VAT invoice.

The business is not using the tour operators’ margin scheme.

Further information

For an invoice to be valid, it must be a full VAT invoice, and it must be given or sent to the customer for them to keep.

A business using the cash accounting scheme should use the above table to determine the rate of VAT which applies, and then pay that amount of VAT in the VAT period in which the money is received.

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Posted on 25 November 2008. To see related posts, try these links...
Categories: VAT
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2 Comments (oldest first)

  1. 1.  Jane Aiken says:

    I had some work done to my chimney, new woodburner installed and plastering work to repair damage done by damp getting in through the chimney.

    The work started in Nov 08 and finished last week (with big gaps in between!!)

    At what rate should the builder have charged me VAT?

    Thanks

    31 March 2009

  2. 2.  admin says:

    As shown above, it depends on the invoice and payment dates.

    If there were big gaps between the work being done, you should also consider whether the work was one big project, or a series of smaller jobs.

    31 March 2009

Comments