VAT Rate Change

JodieR

Is there anything stopping companies from raising invoices in December (at 17.5% VAT) for goods which will only be delivered & paid for in January?
Jodie

Monsoon

Yes. Anti avoidance legislation.

If it's invoiced and paid for in December that is ok, even if it's delivered in Jan. However if it's paid in Jan as well, the tax point would be Jan and therefore 20%.

That's my very in-a-nutshell understanding anyway!

Edit:

Look here

http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1085335108&lang=en&r.l1=1073858808&r.l2=1083126673&r.l3=1083126862&r.l4=1085334907&r.s=sc&type=RESOURCES

and here

http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1085335106&lang=en&r.l1=1073858808&r.l2=1083126673&r.l3=1083126862&r.l4=1085334907&r.s=sc&type=RESOURCES

wildgoose1uk

I am not sure you have to pay for it in December. I thought the key issue was the tax point which is normally when the invoice is raised and not when payment is received.

janwal

Our computer system has been pre programmed so that any invoices with a tax point of 3rd Jan and before will be paid at 17.5% and any dated after 4th Jan will be paid at 20%, the computer will calculate the vat itself depending on the date inputted.

Monsoon

Anti forestalling rules here:
http://www.hmrc.gov.uk/vat/forms-rates/rates/anti-forestall-guidance.pdf

Bluewednesday

wildgoose1uk wrote: »

I am not sure you have to pay for it in December. I thought the key issue was the tax point which is normally when the invoice is raised and not when payment is received.

I believe a payment overrides the invoice date if it comes first and creates the tax point.

It's all in the anti forestalling rules.

JodieR

Thanks for the link BlueWednesday, that explains it better than the one from 15% to 17.5% does (or maybe my brain's working better today). Basically it seems to say that if you raise an invoice to a retail customer in December where the goods will be delivered and paid for in Jan/Feb then so long as the customer isn't a connected person and the value of the invoice isn't over £100k then the invoice can be raised at 17.5%.

I asked this because when the rate went up to 17.5% a year ago a bookkeeping client of mine was advised to do this by his accountant and did so on a large scale - though I was never sure how it would have gone down with a VAT inspector! I had a query from another client the other day asking if he could do it but I was finding it hard to find any specific advice on it.
Thanks

Bluewednesday

Would love to take the credit but it was Monsoon that gave you the link lol

Really useful guidance this time, I agree