A supply made after 4 January 2011 will carry VAT at 20%. Or will it?

It has been well publicised that the standard rate of VAT will increase to 20% on 4 January 2011. This means that all supplies made on or after this date will be subject to the 20% rate of VAT. Or will it?

It is still possible to secure the 17.5% rate of VAT for supplies made on or after 4 January 2011, as long as the provisions of the anti-forestalling legislation are not breached.

HMRC consider that anti-forestalling occurs when arrangements are put in place for a VAT invoice to be issued by a supplier or payment received by a supplier before the rate increase where goods are not due to be delivered or services to be delivered until after the rate increase.

However, the current rate of 17.5% can still apply where an advance payment is made or an invoice is issued in advance of 4 January 2011 (to be paid within a maximum period of 6 months), given the following circumstances: -

· the supply must be valued at £100,000 or less

· the supplier and customer must not be connected parties, and

· the supplier (or someone connected with the supplier) must not provide any finance.

The anti-forestalling legislation does not apply where the supply is being made to a business which is able to fully recover the VAT charged through its own VAT return.

There is scope to mitigate the impact of the rate increase – but businesses need to tread carefully to ensure that they do not fall foul of the anti-forestalling provisions.

If you are in any doubt, do contact us here at The VAT Consultancy and ask to speak to a consultant.

Good News for Business Travel Agents!

We have recently received agreement from HMRC, that Revenue & Customs Brief 21/10 on “bill-back” arrangements, works for overseas clients.

So, if you are a UK agent arranging UK business travel, for clients anywhere in the world, the service provider’s invoice can be issued “c/o” you!

Your statement or payment request to the client, can then be used by the client as evidence for 8th or 13th Directive refund claims.

All much easier for the foreign customer – keeping time and paperwork to a minimum for them.

You can find out more about our VAT services for the travel industry by clicking here.

Time to Pay Agreements - HMRC getting tougher?

As a quick reminder, a 'Time to Pay' Agreement is an agreed payment plan with HMRC to pay VAT debts (as well as other taxes).

An initial call to HMRC’s Payment Support Service on Tel 0845 302 1435 is required (before a demand for payment is received). They will ask initial questions regarding how much the debt is, how long you wish to pay this over etc. It is likely they will request some further documentary evidence to support any proposals put forward.

We have recently renegotiated some TTP agreements where uncontrollable factors have meant client's are unable to stick with the original agreement. Be warned though that HMRC's patience will run out if this occurs regularly and they will resort to legal action!

Recent press has suggested that HMRC are getting tougher on agreeing TTP agreements - we would be interested to know what everyone is experiencing out there.......