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The standard rate of VAT was reduced from 17.5% to 15% for the 13 month period 1 December 2008 to 31 December 2009. HMRC have confirmed their intention that the standard rate of VAT will revert to 17.5% from 1 January 2010.
Legislation will be introduced to counter schemes which purport to apply the 15% VAT rate to goods or services to be supplied on or after the date that the rate returns to 17.5%. The measures will apply where the customer cannot recover all the VAT on the supply and:
- the supplier and customer are connected parties or
- the supplier funds the purchase of the goods or services or
- a VAT invoice is issued by the supplier where payment is not due for at least six months.
A supplementary charge will also apply where a pre-payment in excess of £100,000 is made before the rate rise in respect of goods or services to be provided on or after the date of the rate rise.
The effect of the measures will be to charge supplementary VAT of 2.5% on which VAT of 15% has been declared.
The reduced rate of VAT currently applies to children’s car seats and applies to the combination of a safety seat and a related wheeled framework, booster seats and booster cushions. The reduced rate will be extended to apply to children’s car seat bases from 1 July 2009. |
