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Tax Memo Newsletter Issue 1 (PBR 2008)

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VAT

 

Change to standard rate

TM ¶8070

From 1 December 2008 until 31 December 2009, the standard rate of VAT will be reduced to 15%.

This affects:

- goods and services made on or after 1 December 2008;

- imports on or after 1 December 2008; and

- acquisitions of goods from other EU member states on or after 1 December 2008.

The new VAT fraction to use when a price is stated as being inclusive of VAT is 3/23.

HMRC will adopt a “light touch” to errors, resulting from the change in rate, made on the first VAT return submitted after 1 December 2008.

Further information can be found from http://www.hmrc.gov.uk/pbr2008/vat-guide-det.pdf

 

Memo points 1. For the time of supply rules, see ¶7940 onwards.

2. Where a trader chooses to apply the new rate of VAT to a supply which has either been invoiced or paid for before 1 December, he must issue a credit note to the customer to reflect the reduced VAT liability by 15 January 2009. There is no requirement to notify HMRC of this choice.

3. The rates applying to the flat rate scheme have been reduced (see the newsletter item for ¶8636) as a consequence.

 

 

Flat rate scheme simplification

TM ¶8624, 8650

From 1 April 2009, a trader will be able to join the flat rate scheme so long as his total taxable turnover in the next 12 months is not expected to exceed £150,000. The second test based on business income will no longer apply.

A trader must leave the scheme if the VAT-inclusive value of all supplies in a year exceeds £225,000. From 1 April 2009, the value of these supplies should be calculated in accordance with the trader’s usual method of accounting for VAT on the scheme i.e. either cash received or invoices raised.

 

 

Flat rate scheme - revised rates

TM ¶8636

As a consequence of the reduction in the standard rate of VAT, the following flat rate percentages apply from 1 December 2008 until 31 December 2009:

 

Category of business carried on	Flat rate%
Accountancy or book-keeping	11.5
Advertising	8.5
Agricultural services	7
Any other activity not listed elsewhere	9
Architect, civil and structural engineer or surveyor	11
Boarding or care of animals	9.5
Business services not listed elsewhere	9.5
Catering services, including restaurants and takeaways	10.5
Computer and IT consultancy or data processing	11.5
Computer repair services	10
Dealing in waste or scrap	8.5
Entertainment or journalism	9.5
Estate agency or property management services	9.5
Farming or agriculture not listed elsewhere	5.5
Film, radio, TV, or video production	9.5
Financial services	10.5
Forestry or fishing	8
General building or construction services	7.5
Hairdressing or other beauty treatments	10.5
Hiring or renting goods	7.5
Hotel or accommodation	8.5
Investigation or security	9
Labour-only building or construction services	11.5
Laundry or dry-cleaning services	9.5
Lawyer or legal services	12
Library, archive, museum or other cultural activity	7.5
Management consultancy	11
Manufacturing fabricated metal products	7.5
Manufacturing food	8.5
Manufacturing not listed elsewhere	7
Manufacturing yarn, textiles or clothing	7.5
Membership organisation	5.5
Mining or quarrying	8
Packaging	7.5
Photography	8.5
Post offices	2
Printing	6.5
Publishing	8.5
Pubs	5.5
Real estate activity not listed elsewhere	11
Repairing personal or household goods	7.5
Repairing vehicles	6.5
Retailing food, confectionary, tobacco, newspapers or children’s clothing	2
Retailing pharmaceuticals, medical goods, cosmetics or toiletries	6
Retailing not listed elsewhere	5.5
Retailing of vehicles or fuel	5.5
Secretarial services	9.5
Social work	8
Sport or recreation	6
Transport or storage, including couriers, freight, removals and taxis	8
Travel agency	8
Veterinary medicine	8
Wholesaling agricultural products	5.5
Wholesaling food	5
Wholesaling not listed elsewhere	6

 

 

Retail scheme eligibility

TM ¶8704

From 1 April 2009, a retailer will be able to use a published retail scheme unless the annual VAT-exclusive turnover exceeds £130 million, in which case a bespoke scheme should be agreed with HMRC or normal VAT accounting applies.

Bespoke schemes already agreed by retailers, whose annual turnover is between £100 million and £130 million, will continue in operation until or unless the agreement ends.