Home
About us
News
Contact us
Downloads
Blog

Get ready for the new 20% VAT rate

In the 2010 Budget, the Chancellor announced a proposed increase in the standard rate of VAT to 20% to be effective from 4 January 2011. If you haven't already done so, now is the time to look at ensuring your VAT cost is minimised and that the suppliers you deal with are not overcharging VAT.  Below you will find some ideas for good practice in VAT management which will help reduce the impact of the VAT increase.  

  • Discounts are still commonly applied and there are many suppliers who still fail to make the correct calculation of VAT.  Failure to apply VAT properly will result in additional VAT cost.
  • Printing is often zero rated but the liabilities can be complex and suppliers naturally err in favour of charging VAT if there is any doubt in their minds on the VAT treatment.  It is common to see supplies charged at the standard rate when they should be zero rated.  This can create a current saving but also retrospective action can be taken.  For those who engage in separate design or direct mailing services, some simple restructuring of supplies can create VAT savings by the use of zero rating.
  • Fuel and power supplies can often be liable at the reduced rate of 5% and whilst this is a commonly known area, there is often confusion over the VAT treatment, especially where suppliers change, a common situation nowadays where tariffs vary significantly between highly competitive energy suppliers.
  • Energy saving materials are installed more often these days in properties and where these have a residential use (care homes and hostels included) or a relevant charitable use, then there could be worthwhile opportunities to apply the reduced rate of 5%.  The scope is wide but includes expensive heating controls, ground and air source heat pumps and solar energy systems.
  • Bad debt relief is a well known feature of VAT but it is still surprising how many organisations fail to take advantage of the opportunity to recover VAT or have misunderstood the rules around insuring and factoring debts and not maximised the relief.
  • There are many VAT Tribunal cases these days that demonstrate that it is possible to consider the way supplies are made and whether contractual or procedural changes will mean that supplies perhaps fall into a lower VAT rate.