How Will The VAT Increase Affect Your Business?

Yesterday saw the new VAT regulations come into force.  But are you ready? And what will this mean for your business?

My company Betterprint is well prepared for the VAT increase, which took place at 12.00am yesterday morning. All our goods and services now carry the correct VAT rate. Why not check out our bargains? We are still one of the most competitive companies providing Business cards and matching Stationery on the net.

This is how I know the importance of  recognising the affects the VAT increase may have on business. The following is some useful information about the way the VAT increase may affect your company, and how you can actually boost your sales in this time of inflation.

The Increase 17.5% to 20%

•    The standard rate of VAT is currently 17.5 per cent but increases to 20 per cent on 4 January 2011.
•    For sales of standard-rated goods or services that are made on or after 4 January 2011 you must charge your VAT at the 20 per cent rate.
•    Cash businesses should use the VAT fraction of 1/6
•    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.

How Can You Account For The VAT Rate Change?

Accounting for the change will depend on the kind of business that you have. The special arrangements for businesses trading on 31 December 2009 will not apply to this rate change.

For Retailers:

•    Use the 20 per cent for all takings that you receive on or after 4 January 2011.
However, if your customer pays on or after 4 January 2011 for something they take away (or you deliver) before 4 January 2011 this means your sale takes place before 4 January 2011 and you should use the 17.5 per cent rate.

Don't Forget - If you are a retailer you must clearly show your prices inclusive of VAT.

Businesses that issue VAT invoices
•    Use the 20 per cent rate for all VAT invoices that you issue on or after 4 January 2011. But see our section below on special rules for sales that span the change in rate.

Sales that span the change in rate: 

There are special rules for sales which cross over the change of rate. If you sell goods or services before 4 January 2011 and raise a VAT invoice after that date you can choose to account for VAT at 17.5 per cent. You don't need to tell HM Revenue & Customs if this is done. 

Continuous Supplies of Services 

If you provide a continuous supply of services, you should account for the VAT due whenever you issue a VAT invoice or receive payment, whichever is the earlier. Charge 20 per cent on invoices you issue and payments you received on or after 4 January 2011.

Cash Accounting Scheme

If you use the Cash Accounting Scheme you will need to be able to identify payments received on or after 4 January 2011 that relate to supplies made before that date. VAT at a rate of 17.5 per cent will be due on these payments.

What VAT Can I  Reclaim?

•    You can claim back the VAT you have been charged by your supplier in the usual way.
•    You will still be receiving invoices  after 4 January 2011 showing 17.5 per cent VAT, which relates to purchases you have made before the rate change.
•    In these cases you should claim back VAT at 17.5 per cent.

Beat The VAT Increase & Boost Your Business

Business cards are a great value way to market your business. At Betterprint, we are offering a limited 25% off to welcome 2011. We have a wide range of innovative designs available to customise and make your business stand out. Mail me at quoting "VAT Blog” and in return I will send you a Promo Code worth 25% discount.

Remember: when you buy from Betterprint you also receive a further 20% discount on all additional Matching Products bought at the same time.

Good Luck
DNB  -