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We provide accounting, tax and business advice to individuals, family, and owner-managed businesses from across our offices in Leeds, Manchester, Newcastle and York.

Jane Roffey, VAT Consultant, summarises the VAT implications from the Chancellors Pre-Budget Report

Jane Roffey VAT Consultant

In the Pre-Budget Report the Chancellor announced a reduction in the standard rate of VAT.

The revised rate of 15% will take effect from 1st December 2008 and run until 31st December 2009.

The accounting implications for your business will depend on a number of factors such as whether you supply goods or services; whether you are a retailer or sell business to business; whether you account for VAT by reference to the basic tax point or the invoice date and so on. A couple of scenarios are covered below but for specific advice or questions please get in touch with your usual Garbutt & Elliott contact.

Business to business suppliers may choose to carry on as usual with regard to the tax point rules (see below) but others may choose to apply VAT by reference to the basic tax point.

The basic tax point for goods is the date the goods are delivered or made available to your customer whereas the basic tax point for services is the date of performance. In either case, however, if you either issue an invoice or receive payment before the date the goods are delivered or made available, the tax point will be the date of receipt of payment or the date of the invoice. In this case – where advance notice has been given and the rate of VAT is being reduced – it is unlikely that your customers will pay in advance for goods not yet delivered or services not yet performed. Similarly, customers are unlikely to welcome an invoice in advance of delivery.

You may, however, have already issued an invoice or received payment for goods yet to be delivered and your customer may now welcome a credit note – assuming delivery is to be on or after 1st December.

Those businesses that issue invoices under the ‘14 day rule’ will apply the new rate to all invoices issued on or after 1st December which will effectively bring into the new lower rate goods delivered on or after 18th November.

This note has been addressed to the supplier but remember that, as a business customer, you must claim input tax by reference to your supplier’s invoice and this will depend on whether or not your supplier adopts the change in rate provisions.

Following the changes to the VAT rate If you would like assistance with updating your accounts software then please contact Clare Stones who can talk you through this process.