VAT and other matters

VAT: change of standard rate

It is proposed to increase the standard rate of VAT from 17.5% to 20% with effect for any supply made on or after 4 January 2011. The rate change does not affect either zero-rated supplies nor those supplies subject to VAT at the 5% reduced rate.

Comment
An increase in the standard rate was widely forecast. Unsurprisingly, draft legislation has also been issued setting out anti-avoidance measures to deal with transactions aimed at forestalling the increase in rate.

VAT Flat Rate Scheme

The VAT Flat Rate Scheme simplifies VAT for businesses with an annual turnover (VAT exclusive) of up to £150,000. The percentages used in the scheme will change from 4 January 2011 to reflect the increase in the standard rate of VAT.

VAT: detailed changes

As previously announced changes will be made early next year to:

the VAT recovery on mixed use assets
the place of supply rules for natural gas, heat and cooling
the definition of aircraft that can be supplied at zero rate
certain postal services provided by Royal Mail.

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