The standard rate of VAT was temporarily reduced to 15 per cent on 1 December 2008 and it returned to 17.5 per cent on 1 January 2010.
For any sales of standard-rated goods or services that you make on or after 1 January 2010 you must charge VAT at the rate of 17.5 per cent. If you have a cash business and calculate your VAT using the VAT fraction you must revert to the VAT fraction of seven fortysevenths from 1 January 2010.
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.
This guide tells you how to account for the change to the standard rate of VAT. It also tells you where you can get further information.
On this page:
The way that you should account for the change in the VAT standard rate depends upon the type of business you have.
If you are a retailer you must use the 17.5 per cent rate for all takings that you received on or after 1 January 2010. But if your customer paid after 1 January for something they took away (or you delivered) before 1 January 2010, your sale took place before 1 January 2010 and you should use the 15 per cent rate.
Find out more about retail sales and the change in VAT rate (PDF 248K)
You must use the 17.5 per cent rate for all VAT invoices that you issued on or after 1 January 2010. But see our section below on special rules for sales that span the change in rate.
Read more about when to start charging the 17.5 per cent rate (PDF 248K)
Special arrangements have been set up to help you account for the change in the VAT standard rate, if you are:
and your business operated beyond midnight on 31 December 2009.
Read more about the measures to help business
There are special rules for sales which span the change of rate. If you provided goods or services before 1 January 2010 and raised a VAT invoice after that date you can choose to account for VAT at 15 per cent. You don't need to tell HMRC if you do this.
If you started work on a job before 1 January 2010 but finished afterwards you may account for the work done up to 31 December 2009 at 15 per cent and the remainder at 17.5 per cent. If you choose to do this you will have to be able to demonstrate that the apportionment is fair.
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 17.5 per cent on invoices you issue and payments you received on or after 1 January 2010. You may, if you wish, charge 15 per cent on the services you've provided in the period up to 31 December 2009 and 17.5 per cent on the remainder. If you choose to do this you will have to be able to demonstrate that the apportionment is fair.
Read more about when to start charging the 17.5 per cent rate (PDF 248K)
Read more about the special rules for sales that span the change in rate (PDF 248K)
If you issued a VAT invoice or received prepayment before 1 January 2010 for goods or services which you provided on or after that date VAT will normally be due at the 15 per cent rate. In certain circumstances VAT is due at a rate of 15 per cent on the date of issue of the VAT invoice or receipt of payment before 1 January 2010 and a supplementary charge of 2.5 per cent then becomes due on the 1 January 2010.
Read more about pre-invoicing or pre-payment rules (PDF 248K)
Read more about whether the rules affect you (PDF 83K)
If you use the Cash Accounting Scheme you will need to be able to identify payments received after 1 January 2010 that relate to supplies made before that date. VAT at a rate of 15 per cent will be due on these payments.
Your instalments will not be affected by the change in the standard VAT rate.
The flat rate percentages have been re-calculated to reflect a standard rate of VAT of 17.5%. Some amendments have also been necessary to ensure that the rates accurately reflect the VAT paid by businesses in each sector. The new rates apply from 1 January 2010 until further notice.
Read more about the new flat rates
You can claim back the VAT you have been charged by your supplier in the normal way. You will still be receiving invoices after 1 January 2010 showing 15 per cent VAT relating to purchases you have made before the rate change. In these cases you should claim back VAT at 15 per cent.
Find out more about what VAT you can reclaim (PDF 248K)
You should continue to receive and submit VAT returns in the normal way - monthly, quarterly or annually. The deadlines for submitting your VAT returns and making payments are unchanged. For return periods that cover both before and after 1 January 2010, you will need to add together the VAT on sales charged at 15 per cent and the VAT on sales charged at 17.5 per cent to work out the total VAT on sales to be included in box 1 of your VAT return.
Read more about completing your VAT return and the change in VAT rate (PDF 248K)
If you discover that you have made an error you can correct it in the normal way by making a voluntary disclosure or correcting it on your next return (subject to the normal limit).
More about correcting errors on your VAT return
If you do make mistakes accounting for the change of rate on your first VAT Return after the change, HMRC will only seek an adjustment if there is likely to be an overall revenue loss.
