Jim Harra for HM Revenue & Customs said: “With the Christmas and New Year holidays almost upon us, businesses must be ready to implement the increase to the standard rate of VAT.
“Don’t leave it until the last minute to make any necessary changes to your book-keeping and accounting systems including invoicing and tills. You also need to make sure your staff are fully aware that the new 20% rate must be charged from 4 January.”
Retailers must charge the 20% rate on all standard-rated takings received on or after 4 January 2011 but if a customer pays on or after that date for something they take away (or have delivered) before 4 January, the sale takes place before the rate change and the 17.5% rate should be used.
Retailers who use electronic tills will have to re-program them, so that the correct VAT rate is calculated and shown on till receipts.
Normally businesses must use the 20% rate for all VAT Invoices they issue on or after 4 January 2011, which are issued within 14 days (or a longer period previously agreed with HMRC) of goods or services being provided. However, where goods or services are supplied before 4 January businesses can choose to charge the VAT at the old rate of 17.5 per cent.
If a business receives a purchase invoice dated on or after 4 January which shows the VAT at 17.5 per cent, only the actual amount shown can be reclaimed.
