RSS logo
Home > Our services > Tax > Public interest entities > VAT changes

Audit & assurance

Tax


Financial Advisory Services

Consulting

Outsourcing

International desks

 

VAT changes

The standard rate of VAT is set to rise to 20% with effect from 4 January 2011.

The effects of this change will be widely felt, from higher prices on most items in the shops for consumers, to retailers who are unable to pass on the rise and therefore suffer a drop in profit margins, through the charity, education and health sectors and also to larger businesses that are unable to fully recover the VAT they incur, such as those in the finance and insurance sectors.

Businesses will also need to make the necessary changes to their software and accounting systems to account for the rate change, although the date of the change means that - unlike the previous rate change – these changes do not have to be implemented immediately and can be properly planned.

The six month lead-in time to the rate change also means that partially exempt businesses have a “window of opportunity” in which to explore areas where the increase in costs may be managed or mitigated to some extent, for example, by bringing forward planned expenditure or making pre-payments. However, by way of caution, it should be noted that HMRC has once again introduced anti-forestalling measures to counter any perceived “artificial arrangements” in this area.

Contact us