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Contact Us Business News - January
VAT - Extension of 14 Day Limit
HMRC have issued further guidance to businesses on the reduction in the standard rate of VAT from 1 December 2008. The guidance clarifies certain issues regarding the ‘tax point’ rules for the date of supply.
In normal circumstances, where a business invoices within 14 days after the supply of goods and services, this is generally the effective tax point for VAT, replacing the basic date of supply rule. This does not apply where payment is received in advance, as this triggers the tax point earlier. It does mean that goods and services supplied between 18 and 30 November but invoiced from 1 December 2008 onwards should be charged at 15% where provided within 14 days of the supply date. Concern that businesses would not be able to effect the necessary changes to their accounting systems in time has resulted in a prompt response by HMRC.
HMRC have agreed that the normal 14 day limit can be extended to 30 days for goods or services provided between 18 November 2008 and 30 November 2008 inclusive. Such supplies can be invoiced at 15% at any time up to 30 days after the supply was made, provided that the invoice is raised on or after 1 December 2008. This is to apply to all businesses without the need to obtain formal approval. This effectively allows businesses additional time to amend their accounting systems following the rate change.
Where a business has previously agreed an extension to the 14 day limit with HMRC, it can continue to use that time limit but where it is less than 30 days it can opt to use the 30 day limit instead.
The link at the bottom of this article will take you to the guidance on the change in the standard rate of VAT. However, please do get in touch if you have any queries on the VAT changes.
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