Garbetts News December 20008

VAT 15% - practical guidelines

The Chancellor announced a reduction in the standard rate of VAT to 15% from 1 December 2008. This reduction will be effective for a fixed period of 13 months. From the 1 January 2010 the rate will revert to 17.5%.

For VAT registered traders this creates a number of practical issues, some of which are highlighted in this article.

All sales on or after 1 December 2008 should be charged plus 15% VAT.
Zero rated, reduced rate and exempt sales or supplies are unchanged.
Retail businesses should use the new 15% rate on all takings received on or after 1 December 2008 - except, if a customer took delivery before 1 December, in which case you should apply the 17.5% rate.
If you supply goods to other VAT registered customers and need to issue tax invoices, you should add on 15% VAT to all invoices dated 1 December or later - except where you provided the goods or services more than 14 days before you issue the VAT invoice. For example, if you issue a VAT invoice on 1 December for goods or services provided before 18 November 2008, or you were paid before 1 December. In these cases, your sale takes place before 1 December and you must use the old rate of 17.5%. Note if you received part payment before 1 December, use the old rate for the part payment.
Under the normal rules all invoices issued and all payments received before 1 December 2008 are subject to VAT at the old rate, 17.5%. There are also optional rules that you can adopt. See section 3 of the HMRC publication recommended at the end of this article for more information on these special rules.
If you want to work out the 15% VAT charged in a VAT inclusive amount, multiply by the fraction 3/23.
If you have point of sale tills etc that produce a VAT inclusive receipt you may need to contact your supplier to ensure the VAT rate applied is changed for sales after 1 December.
If you want to reduce your current (pre 1 December) sales price to reflect the reduction in VAT to 15%, multiply your old price by 115/117.5, this is equal to 46/47.
Do you have to pass on the reduction in VAT to your customers? The answer is no - its up to you.
If your VAT return period does not begin on 1 December, you will have to account for VAT in the quarter which straddles this date accommodating both rates of VAT. If you use software to produce your VAT returns your supplier should be able to advise you on this.
Make sure that you follow your accounts software supplier's instructions, or give us a call if you need help regarding the change in VAT rate.
If you operate a cash accounting scheme you will continue to pay VAT based on receipts from customers. If the amount you receive after 1 December 2008 is payment of an invoice including VAT at 17.5% (pre 1 December 2008) or 15% (post 30 November 2008) you must include the appropriate amount in your output tax calculation. Most accounts software programs that accommodate cash accounting will do this automatically.
If you are registered to use the flat rate scheme there are new percentage rates you should apply from 1 December 2008. The new rates are published on pages 43 and 44 of the HMRC guide highlighted in the paragraph that follows.

HM Revenue & Customs have published a comprehensive guide to the VAT change. You can download it at: http://www.hmrc.gov.uk/pbr2008/vat-guide-det.pdf. It is quite a large PDF document. If you need specific advice on any aspect of the change please call.

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		The Road to Recovery
	Share prices (as well as being highly sensitive to investor sentiment) anticipate future company performance and are therefore likely to rise before economic growth has resumed. However, theories on the type of stocks that will lead the recovery are varied. Regionally, the US has historically been the first to recover but the problems it faces at the moment are unprecedented. It is likely to emerge with a huge budget deficit that will act as a headwind to economic growth for some time. Similarly, our own debt burden is likely to hold back recovery in the UK. Instead, countries with lower debt levels, at both an individual, corporate and government level, such as the emerging markets, Japan and the bigger economies in Europe are likely to do better as the environment improves. As for sectors, more economically sensitive stocks have traditionally done well in a recovery phase. In addition, areas that have been particularly beaten up also tend to show stronger performance. This could be the stronger stocks in unfavoured sectors, such as financials - but there are also plenty of quality large stocks now trading on high yields, which bodes well for equity income funds. At Garbetts’ Financial Strategies we construct and manage our client’s portfolios mindful of the macro-economic climate. We believe that maintaining a diverse spread of investments both geographically and by investment type is the best way to ensure the long term financial future of our clients. If you would like to know more about our services, or just want a quick conversation to discuss your immediate financial concerns, give us all call on 527111 – we are always happy to help. Contributed by Matt Jones of GFS. Call GFS on 01983 527111. www.garbetts.com/gfs Back to top


	DISCLAIMER - PLEASE NOTE: The ideas shared with you in this email are intended to inform rather than advise. Taxpayers circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this newsletter, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.