With the VAT rate change coming in on the first of December, companies across the country are scrambling to be ready in time. Here we go though some tips for companies trying to deal with the upcoming VAT rate change.
Companies that do not identify VAT on customer receipts can continue to work as they did before. As a company, you do not have to reduce your prices. Of course, the government is trying to get business to pass the savings on to customers, however, there is nothing to stop businesses keeping their prices the same, and keeping the difference for themselves.
If you do issue receipts that identify VAT, then you should be updating your systems so that they are 15% VAT compatible. Some software and hardware makes this easy to do, while for other systems, you may need to contact your supplier. If in doubt, contact the supplier of your hardware and software.
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For this tax year, VAT calculations will be slightly more complicated than in the past, since you will have to calculate two values: The VAT payable at 17.5% up until the 30th November, then the VAT payable at 15% from the 1st December until the end of the tax year. These two values then need to be added together to get your final VAT amount. The same will have to be done in the next tax year - 15% from the beginning of the tax year until the 31st December 2009, then the normal rate of 17.5% from the 1st January until the end of the tax year.
For many companies on the flat-rate scheme, the payable VAT rate will have also been reduced. The rate for some areas has remained the same, however, for the vast majority it has been reduced:
| Category of business |
Appropriate percentage |
| 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 that are 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 that is not listed elsewhere |
5.5 |
| Film, radio, television or video production |
9.5 |
| Financial services |
10.5 |
| Forestry or fishing |
8 |
| General building or construction services* |
7.5 |
| Hairdressing or other beauty treatment services |
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 that is not listed elsewhere |
7.5 |
| Manufacturing fabricated metal products |
8.5 |
| Manufacturing food |
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 that is not listed elsewhere |
5.5 |
| Retailing 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 that is not listed elsewhere |
6 |
| *"Labour-only building or construction services" means building or construction services where the value of materials supplied is less than
10 per cent of relevant turnover from such services; any other building or construction services are "general building or construction services". |
As will all of these things, the best source of information is the HMRC website - any queries about the tax rate change should be directed to them.