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VAT Changes
The standard rate of VAT will increase by 2% from 21% to 23% on 1 January 2012.
The standard rate applies to a wide range of goods and services including electronic products, motor vehicles, rents, adult clothing, telecoms services as well as legal and advisory services.
What are the implications for you?
The 2% increase will mean that accounting systems will need to be able to cater for a variety of scenarios. The VAT treatment attaching to supplies made and received is determined by a number of factors including:
- is the supplier operating on the invoice basis or cash-receipts basis?
- is the customer a business person or an unregistered individual?
- has the customer made any advance payments (i.e. before an invoice has issued or a supply has been made)?
The following table summarises when VAT becomes due (which also determines the appropriate rate).
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Business customer
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Private customer
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Supplier on invoice basis
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General position
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Invoice date (note: there are time limits in which invoices must be issued)
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Time of supply
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Advance payment
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21% if invoiced before 1 January 2012
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Time of supply
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Supplier on cash basis
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General position
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Time of supply
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Time of supply
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Advance payment
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21% if received before 1 January 2012 23% if received after 1 January 2012
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21% if received before 1 January 2012 23% if received after 1 January 2012
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What should you be doing now?
· you need to confirm that your accounting systems can cater for the change in the rate;
· if you do not have full VAT recovery, you may want to consider acquiring large-value items in advance of the rate change. In certain cases, it may be enough for the supplier to issue the invoice before the end of the year; and
· you may be able to invoice your business clients at the lower rate before year end which could generate a VAT saving for them if they do not have full VAT recovery.
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