VAT Focus - A Round-Up Of Recent VAT-Related Developments, October 2009

VAT rate change 1 January 2010 The standard rate of VAT will return to 17.5% on 1 January 2010. This increase in VAT will have an immediate bottom-line impact for businesses selling goods or services that cannot immediately increase prices and for businesses that are unable to reclaim VAT in full.

Businesses selling goods or services spanning the VAT rate change must determine the correct rate of VAT to apply, subject to complicated rules. There are special provisions which allow the existing 15% rate to be used in certain circumstances after 1 January 2010. However, 'anti-forestalling' legislation will restrict the extent to which the 15% rate can be applied after 1 January 2010 to prevent the abuse of these special provisions.

Businesses will need to make sure accounting systems are updated and possibly re-programmed to allow for the change that will be required at midnight on 31 December 2009, and to allow for any use of the special provisions for the 15% rate to continue after 1 January 2010.

What next?

If you require assistance with the rules relating to the change of VAT rate, or guidance on making use of the special provisions to prolong the use of the 15% rate, please speak to your usual Smith & Williamson contact.

A more detailed briefing note is available, please contact us, or visit our website www.smith.williamson.co.uk/interrupt/index/cid/2787.co.uk for a copy.

2010 place of supply rule change – reminder If your business provides or receives services from outside the UK, you should be aware of the changes to the place of supply rules for services, which take effect from 1 January 2010.

From this date, the general rule for the place of supply of services for all businessto- business supplies of services will be the place where the customer is established, instead of where the supplier is established, as is currently the case. There are of course a number of exceptions and special rules for certain services, such as supplies related to land, passenger transport and cultural and artistic services among others.

These changes will affect all UK businesses that make taxable supplies of services to business customers in other European Union (EU) countries where the customer is required to account for VAT under the 'reverse charge' procedure.

One of the most important practical changes that businesses will need to consider will be the requirement to complete European Commission Sales Lists for supplies of taxable services to which the...