VAT Changes

Rates
The Chancellor confirmed that the standard rate of VAT will revert to 17.5% on 1 January 2010. If businesses try to avoid the VAT rate increase by paying early or by invoicing early at the current rate of 15%, they will have to pay a supplementary charge of 2.5%.

Registration limit
The compulsory VAT registration threshold will increase by just £1,000 to £68,000 on 1 May 2009. Businesses are obliged to register for VAT once their turnover for any 12 month period exceeds this limit, or if they expect their turnover to meet this threshold in the next 30 days. The turnover threshold, below which a business may apply to be deregistered for VAT, will increase to £66,000 on 1 May 2009.

International Transactions
If you buy or sell goods or services across international borders you need to be aware of changes in the VAT rules which are going to be phased in between 1 January 2010 and 1 January 2013. Currently only businesses that sell goods into other countries need to complete an EC sales list, but from 1 January 2010 businesses that supply services to customers in other countries will need to complete this document every quarter. The rules that govern when and where a service is treated as being supplied are also changing.

From 1 January 2010 it will be easier to reclaim VAT incurred in another EU country, as the claim will be made directly to HMRC in electronic form.