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Time of supply See VM ¶750 The standard rate of VAT will increase to 20% from 17.5% with effect from 4 January 2011. Special measures will be introduced to prevent the 17.5% rate applying to supplies made on or after 4 January 2011. The special rules will apply to standard-rated goods and services only. They will provide for a supplementary charge of 2.5%, due on 4 January 2011, where the customer cannot recover all the VAT on the supply and at least one of the following applies: » the supplier and customer are connected; » the value of the supply (and any related supplies) exceeds £100,000, although this is not a relevant criterion where prepayments or issuing advance VAT invoices is normal commercial practice; » the supplier (or someone connected to the supplier) funds a prepayment for the goods or services; or » an advance VAT invoice is issued where payment is not due in full within six months (this does not apply to hire purchase invoices issued in accordance with normal commercial practice). Similar rules will seek to prevent the use of rights or options to avoid the supplementary charge. They will cover cases where, before 4 January 2011, the customer is granted the right to receive goods and services after 3 January 2011, either free or at a discount, the customer cannot recover all the VAT on the right or option, and at least one of the following applies: » the grantor and the customer are connected; » the consideration for the right or option (and any related supplies) exceeds £100,000, although this is not a relevant criterion where the right or option is normal commercial practice; or » the supplier (or someone connected to the supplier) funds the payment for the right or option. The charge becomes due on the date that the option is first exercised on or after 4 January 2011. The supplementary charge does not apply to prepaid or invoiced rentals of land, buildings or other assets, if the period concerned is a year or less and the prepayment or the issuing of an advance invoice is normal commercial practice. Whether suppliers are able to adjust the amount payable under their contracts with customers to take account of any supplementary charges will depend on the contracts themselves. Rate of VAT See VM ¶1090 The standard rate of VAT will increase to 20% from 17.5% with effect from 4 January 2011. No change will be made to the list of zero-rated items and the reduced rate will remain at 5%. |
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185 PARK STREET BANKSIDE LONDON SE1 9DY (T) 020 7803 4666 (F) 020 7803 4699 |
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