VAT Rate Change January 2011
Increase in the standard VAT rate from 4th January 2011
The standard rate of VAT will be increased to 20% from 4th January 2011.
For any sales of standard-rated goods or services that you make on or after 4th January 2011 you must charge VAT at the rate of 20 per cent. If you have a cash business and calculate your VAT using the VAT fraction you must revert to the VAT fraction of 1/6th
The change only applies to the standard VAT rate. There are no changes to sales that are zero-rated or reduced-rated for VAT. Similarly, there are no changes to the VAT exemptions. Any sales you make at these rates are unaffected by this change.
Purchase Invoices received after 04/01/11 for goods/services received before that date should be processed as usual. However, if no order was issued, please select the VAT Treatment of “CU Standard Temp” on the manual Payment Grids whenever 17.5% VAT is applicable.
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 4th 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 HMRC if you do this.
Services you start before 4th January 2011 but finish afterwards
If you start work on a job before 4th January 2011 but finish afterwards you may account for the work done up to 3rd January 2011 at 17.5 per cent and the remainder at 20 per cent. If you choose to do this you will have to be able to demonstrate that the apportionment is fair.
Continuous supplies of services
If you provide a continuous supply of services, such as leasing of photocopiers, you should account for the VAT due whenever you issue a VAT invoice or receive payment, whichever is the earlier. You must charge 20 per cent on invoices you issue and payments you receive on or after 4th January 2011. You may, if you wish, charge 17.5 per cent on the services you’ve provided in the period up to 3rd January 2011 and 20 per cent on the remainder. If you choose to do this you will have to be able to demonstrate that the apportionment is fair.
Purchases spanning the change in rate
The Oracle Tax Engine will calculate the VAT rate applicable at the point at which the order is raised. This may differ from the VAT rate on the invoice if the date of delivery and/or date of invoice span 4th January 2011.
If the invoice is dated after 4th January 2011, Accounts Payable will release the invoice for payment provided the goods have been receipted appropriately. Where invoices are passed for payment without an order being placed, the School/Directorate must ensure the appropriate VAT Treatment field is selected on the payment advise grid.
Please note the following VAT Treatments are appropriate:
Invoices dated 3rd January 2011 and earlier:
CU Standard Temp = 15%
CU Standard = 17.5%
Invoices dated 4th January 2011 and later:
CU Standard Temp = 17.5%
CU Standard = 20%
Due to the volume of transactions that are dealt with, it is the responsibility of the School/Directorate to ensure the correct treatment is selected.
Please ensure all the relevant staff in your School/Department are aware of this change.
Queries should be forwarded in the first instance to:
Additional information can also be found on HMRC website at