VAT Rate changing

[Alison Jones]

Hi

Does anyone know if the VAT rate changing back to 17.5% on 1st January 2010 has been confirmed.

I thought it had, but hubby said someone had told him that it is changing on 1st January but they have not set a VAT rate yet.

Think they should have left the VAT rate alone. We opened in December 2008 so VAT rate 15%, we set all our prices with this VAT rate, now have to change all our prices if it is changing again on 1st January, customers will moan about our increases in price.

Alison

 

[MyAccountantOnline]

I havent heard anything to the contrary and certainly on the HMRC website it does state it will return to 17.5% - http://www.hmrc.gov.uk/vat/forms-rates/rates/rate-changes.htm

 

[Philip Hoyle]

And given the state of the nation's finances, it would be wise to make sure that your systems etc can make further changes in the future as it's highly likely that it won't stay at 17.5% and could increase to 20% or even more. I don't think the change back to 17.5% will be the last increase!

 

[KM-Tiger]

And we've had 2 rates in the past, a higher rate for what was deemed a 'luxury'.

 

[MyAccountantOnline]

And we've had 2 rates in the past, a higher rate for what was deemed a 'luxury'.

Not old enough to remember that

 

[David Griffiths]

Not old enough to remember that

I can. It was 25% and the standard rate at the time was, iirc,8%

Produced the normal VAT craziness. Some electrical appliances - cookers and fridges I think - were 8% and the rest were 25%

Spare parts were rated as the original appliance. So if you bought a new handle for a fridge door, that was 8% but exactly the same item for the matching freezer was 25%.

Some things that were deemed to be luxuries were quite surprising, as of course were some of the thngs that weren't.

 

[3pic]

VAT will return to 17.5% on 01 January 2010 - it was made clear in the last budget we had.

Whether Gordo and Darling do something in the next pre-budget report sometime in November is ayone's guess but for now, we're back to 17.5% on New Years day.

As Philip has noted, I doubt very much that this will be the last VAT change - it'll be increased in the next March budget for sure - whoever gets into power - but the bigger question is.....what will the rate be?

 

[DanMartin]

I read a prediction piece today from an accountancy firm which forecast that Darling may announce during his pre-budget speech a delay of the VAT reversal until February to help retailers cope with the January sales.

 

[elaine@cheapaccounting]

Yes but the sting in the tail will be an increase of the rate!!!

Shall we guess what it will rise to?

My vote is for 19.5%

 

[better]

Why choose a date which is a holiday for the rate to go back to 17.5% now i have to come into work and change all of our online prices. This government is a complete waste of space!

 

It'll go to 17.5% cos they have publicly promised that, but you can be certain they will raise it again as soon as they possibly can.

 

[elaine@cheapaccounting]

I just wonder if they will put it up all at once otherwise people will have to do admin twice for changing e.g. shelf labels, price tags etc.

System changes are straight forward and easy to implement but it is all the manual work of the price changes, changing DDs, Standing orders etc that takes the time.

Anyway we can only wait and see.

I have to say I love your faith in a government keeping their promises

 

[3pic]

I'm thinking we'll have a 20% VAT rate.

It is 2.5% more than 17.5% (and the reduction was 2.5% to 15% as well).so there is some consistency here.

It is a nice round figure, the public will be outraged at first but then relaise that it'll only add a few hundred quid onto their annual budgets (in the same way the reduction didn't really make that much difference either).

Most of the other EU member states have VAT rates around the 20% mark as well (Ireland 21.5%, France 19.6%, Italy/Austria 20%, Czech/Germany 19%, Poland 22%, Sweden 25%!!). So we'd be pitching it just right at 20%.

 

[Zeno]

If we are taking bets, I am with 3pic on the 20% Rate.

I also will not be surprised if some of the currently zero rated items become standard rated. They won't risk putting it on food but perhaps books etc?

 

[Alison Jones]

The government surely would not be stupid enough to increase VAT Rate to anything other then the 17.5%, it would have defeated the whole purpose of them decreasing it to 15% for a year if they then increase it to say 20%.

Alison

 

[elaine@cheapaccounting]

The government surely would not be stupid enough to increase VAT Rate to anything other then the 17.5%, it would have defeated the whole purpose of them decreasing it to 15% for a year if they then increase it to say 20%.

Alison

I am happy to bet they will (and I am so not a gambling person) - how else are they going to fund the short fall in public finances.

I can't wait to see the outcome of this .....

When is the PBR?

 

[3pic]

When is the PBR?

Still not been announced as yet, last years was 24 November so I'd imagine sometime around then.

I guess Darling is waiting to see if there is any good news to report before finalising his figures.

I agree, elaine, the government have to raise finance somehow to pay of the massive debts they have accumulted, VAT is the easiest and cheapest option and a rise is in line with all the other EU countries who have been raising their VAT......even Switzerland and India are raising their VAT rates as well and Big Arnie in California has gone to the Senate to get permission to scrap GST and introduce VAT as GST only covers certain purchases whereas VAT will cover all sales.

 

[elaine@cheapaccounting]

Hey at least we agree there - we can fight about the actual final rate. I'll have 50p on 19.5%

I would have thought the PBR would have been announced now / soon.

The thing is I suppose when you know you will have nothing good to say you put it off as long as possible and hope people bury it in the run up to Xmas

 

[3pic]

I suspect VAT will stay at 17.5% until we get closer to the elections in May 2010.

Depending upon how things are looking (for Brown) will determine the future of VAT. If Brown thinks he can win, he's likely to increase VAT to maybe 18.5% - not too drastic and he'll explain to the public why it has to go up, if he wins he can always increase the rate again at the next budget as he'll have another 3-4 years in power.

If Brown doesn't get in and Cameron does, they'll take it to 20% and blame Brown for having to do this becuase of the mess Brown had made of the economy, so a great scapegoat for them.

Bearing in mind our history, the last time the Tories took over from a failing Labour regime, the first thing they did was whack up the VAT rate, so as is often the case, we've learnt nothing and once again, history is repeating itself.

 

[elaine@cheapaccounting]

I hope you are right - I will need to get a few things purchased before the rate rise!!!

 

[stevemcg]

I'd bet on 19.5% as well. It's just under the magic 20% figure and would allow HMRC to collect extra tax which they certainly need at the moment!

 

[cotc2001]

Darling may announce during his pre-budget speech a delay of the VAT reversal until February to help retailers cope with the January sales.

Or to put it another way everyone will probably have a cracking hangover on Jan 1st so we aren't so stupid to expect everyone to change their prices on Jan 1st.... oh wait stupid+politician do actually go together. Damn!!! i'll stock up on the solphadine

 

[ICU_Clean]

I doubt they will increase the VAT rate. Brown is on his last legs and well he knows it. Pumping up the VAT rate with an election so close would be absolute madness if he thinks he is in with a slim shout of winning the election.

On the other hand if he thinks he has no chance of winning then he has nothing to lose as he will be ousted anyways. So he may just start making very bold decisions, but given his recent U turn on the TA funding i don't think he has the bottle for anything controversial.

 

[Christiane]

I read they might postpone till February so as not to affect January sales!

 

[David Griffiths]

A word of warning for people on the flat rate - if you are accounting for the VAT on the basis of cash received, then you will pay the higher flat rate for all payments received after January 1, even if the original invoice was raisd at 15%

 

[3pic]

I read they might postpone till February so as not to affect January sales!

Announced Friday that the Pre-Budget Report will not now happen in November as is tradition and will now be presneted sometime 'closer to Christmas'.

Brown is hoping to see some goods news by December and so, like last year's last minute VAT drop......he may just announce the VAT rate is frozen for just a bit longer.....

 

[Davidri]

A word of warning for people on the flat rate - if you are accounting for the VAT on the basis of cash received, then you will pay the higher flat rate for all payments received after January 1, even if the original invoice was raisd at 15%

That's not what HMRC says.

In the VAT Rate change guidance notes, it says that if you use the cash-based method of Flat Rate VAT, you have to "apply the flat rate percentage that was in place at the time of supply and not the rate that is in place when payment is received."

 

[yorkshirejames]

Guess the next two months are the time to buy a new car/new three piece suite then.

 

[Jaydee]

Announced Friday that the Pre-Budget Report will not now happen in November as is tradition and will now be presented sometime 'closer to Christmas'.

Now confirmed as 9 December.

 

[Brad Naylor]

I think that we will have a VAT rate of at least 20% by this time next year, if not 22.5%. That's regardless of who wins the election.

It makes me even more determined to keep below the registration threshold!

 

[elaine@cheapaccounting]

It makes me even more determined to keep below the registration threshold!

unless your customers are vat registered then it makes no difference

 

[Spongebob]

unless your customers are vat registered then it makes no difference

:|

Brad's customers are NOT registered. It makes a huge difference to him that he doesn't charge VAT on his services. His retail prices would have to rise by the prevailing rate, and his clients cannot claim it back.

This could make the difference between a business being viable and not.

 

[DFL]

Ill go with 19.5% for VAT - and I'll raise you 25% (minimum) for CGT

 

[NICHOLASM1987]

i am sure from what i have seen all over the web and gov websites its due to change smack on the first of jan they have lost 6 billion (so ive been told) from the 2.5% drop i can not imagine a delay occuring. and then in my opinion will rise to 20% within 2 years of this

 

[yorkshirejames]

:|

Brad's customers are NOT registered. It makes a huge difference to him that he doesn't charge VAT on his services. His retail prices would have to rise by the prevailing rate, and his clients cannot claim it back.

This could make the difference between a business being viable and not.

I think spongebob (unlike Elaine) was assuming that Brad would have enough business sense to know that if all his customers were VAT registered and he himself was fully recoverable then there would be no issue. I too assumed that Brad was making the point because it truly was a genuine issue for him.

Regardless of whether or not spongebob was offensive - he and Brad make a valid point about small businesses who sell to end consumers.

 

[elaine@cheapaccounting]

James - I really look forward to your posts. Please keep them up.

 

[yorkshirejames]

James - I really look forward to your posts. Please keep them up.

Thanks Elaine, likewise (and indeed, I love the posts from all the accountants on here). Love the new picture by the way.