The standard rate of VAT will return to 17.5 per cent on January 1, 2010 from its current rate of 15 per cent. “Businesses need to check their accounting and computer systems now to make sure they can cope with the change,” comments Hannah Dobson, VAT director at Smith & Williamson, the accountancy and financial services group. “To make matters worse, penalties were ramped up in April this year. If firms make mistakes, they could face penalties of up to 100 per cent of the unpaid tax.” She advises entrepreneurs to keep up with invoicing, so that all services completed and goods supplied up to and including December 31, 2009 are invoiced promptly. Dobson reckons complications occur when there is a high volume of sales (such as with internet retailers which must quote a gross price), where services are imported or exported, or where work straddles the date when the VAT rate changes – which is common for those in the construction industry where stage payments are the norm.
“Firms which provide continuous services, such as professional consultancies, should consider whether they can time apportion invoices for work undertaken before 1 January to qualify for the 15 per cent rate,” she says. “However, businesses should make sure that any early invoicing does not fall foul of the anti-forestalling rules.”
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