How can I get round the vat rise in January?

oneborneveryminute

We are due to have the common parts of our building refurbished in January 2011. The problem is that we have to pay the extra VAT. We can't bring the works forward by even 1 month because we have to adhere to a section 20 notice. Has anyone got any ideas how we can avoid or minimise the extra VAT without breaking the law?

escortg3

My partner is self employed and registered for VAT. On January 1st onwards we will be charging customers 20% vat. BUT we still have some invoices to send out for work started in December that isnt finished yet. When these invoices are sent in January as its for work in 2010 we will be charging those people 17.5% VAT.

So not sure, perhaps if they quote you a price in 2010 it would stand. someone with more knowledge will come along and tell you i am sure

John_Pierpoint

https://forums.moneysavingexpert.com/discussion/2880306

System

escortg3 wrote: »

On January 1st onwards we will be charging customers 20% vat.

I hope you mean January 4th

chrismac1

if you are willing to pay some or all before 4 january, that creates a tax point at 17.5% in my view - but gives you another problem, namely do you want the risk of paying up front?

antrobus

chrismac1 wrote: »

if you are willing to pay some or all before 4 january, that creates a tax point at 17.5% in my view - but gives you another problem, namely do you want the risk of paying up front?

I believe that ito be correct. If OP paid for the works before the 4th Jan, then VAT would be charged at 17.5%.

P.S. I agree with the 'but' as well.

leveller2911

escortg3 wrote: »

My partner is self employed and registered for VAT. On January 1st onwards we will be charging customers 20% vat. BUT we still have some invoices to send out for work started in December that isnt finished yet. When these invoices are sent in January as its for work in 2010 we will be charging those people 17.5% VAT.


I stand to be corrected but it doesn't matter when the work was done its the date when the invoice is raised as to what VAT rate you charge.
So if you raise the invoice on the 5th Jan (new rate comes in on the 4th Jan) then you should charge 20% vat, whereas if the invoice is raised on 3rd Jan its 17.5% even if the work was carried out in 2010........Wheres Jason LVC?? when you need him......

escortg3

!!!!!! wrote: »

I hope you mean January 4th

Oops sorry yeah is do. 4th it it:)

blue_monkey_2

leveller2911 wrote: »

escortg3 wrote: »

My partner is self employed and registered for VAT. On January 1st onwards we will be charging customers 20% vat. BUT we still have some invoices to send out for work started in December that isnt finished yet. When these invoices are sent in January as its for work in 2010 we will be charging those people 17.5% VAT.


I stand to be corrected but it doesn't matter when the work was done its the date when the invoice is raised as to what VAT rate you charge.
So if you raise the invoice on the 5th Jan (new rate comes in on the 4th Jan) then you should charge 20% vat, whereas if the invoice is raised on 3rd Jan its 17.5% even if the work was carried out in 2010........Wheres Jason LVC?? when you need him......

You are correct, I was going to post the same thing. It is the date that the invoice is raised. So if you are going to charge 17.5%, date the invoice 3rd Jan.

escortg3

Sales that span the change in rate

There are special rules for sales which span the change of rate. If you provide goods or services before 4 January 2011 and raise a VAT invoice after that date you can choose to account for VAT at 17.5 per cent. You don't need to tell HM Revenue & Customs (HMRC) if you do this

The change of rate rules may be used where you provide goods or perform services before 4 January 2011 and raise a VAT invoice and, in some cases, receive a payment after the rate change.
So, for example, if you issue a VAT invoice on or after 4 January 2011, for goods you provided, or services that you completed before 4 January 2011, you can, if you wish, apply the 17.5 per cent rate.

http://www.hmrc.gov.uk/vat/forms-rates/rates/rate-rise-guidance.pdf#page=7

Thats from hmrc.gov website so i am correct that i can apply the 17.5% VAT rate for work done in dec 2010

chrismac1

The tax point for goods is normally the date of delivery, and for services the date the work was done - unless paid for in advance when the tax point is the payment date. Some examples:

1. Buy a kitchen, pay 25% down now - that's a tax point and the VAT is 17.5%. installed and signed off on 5 Jan 2011 - that's a tax point and the invoice for the 75% is at 20%.
2. Agency worker submits 4 timesheets all dated Dec 2010. Agency accounts staff on Xmas hols, invoice client on 10 Jan 2011 - tax point, but can invoice at 17.5% as the work was complete in Dec 2010 and invoice is being raised within the 14 day window.
3. Long term contract has milestone in Nov 2010 and the next formal one in March 2011. Best practice is to get a QS valuation on 4 jan 2011. Milestone can then be split between 17.5% up to 3 Jan 11 and 20% thereafter. I believe in this case that the fact the contract states the milestone dates means it is OK to invoice in this way, even though the invoice date is after the 14 day window.
4. Accountant is providing continuous service paid for via standing order. Should issue a schedule to VAT-registered customers showing the Dec 10 tax point at 17.5% and the Jan 11 ones at 20%.

If anyone has tax point questions not covered in these examples, throw them at me!