Last week HMRC issued a number of documents explaining the implications of the new VAT rate. The most recent, issued last Friday is a supplementary document responding to some specific queries from different business sectors. It is called “What’s New” More Guidance and Questions and Answers and is here on the website: http://www.hmrc.gov.uk/vat/vat-rate-change.pdf
There are a couple of particularly interesting things, first the announcement of a limited extension to the 14 day time of supply rule for businesses who issue VAT invoices, second some further advice for retailers.
The normal 14 day rule has been extended to 30 days for supplies made between 18 – 30 November to give businesses time to make the necessary changes to their accounting systems. This is helpful from an administrative point of view. It also means that there might be a further VAT saving benefit for customers who are partly exempt (and cannot recover all of their input tax) and receive goods or services during this 13 day period. If the supplier has not yet issued the invoice or received payment before 1 December, as long as the invoice is issued within 30 days, then the time of supply becomes the date of issue of the invoice. The customer can benefit from the reduced VAT rate.
For those retailers who have been unable to adjust the VAT rate shown on till receipts by 1 December, HMRC have agreed that they can account for VAT at the new rate of 15% (ie 3/23 of the gross receipt) even if the till receipt shows the old rate or an incorrect VAT amount. They should make every effort to update their till receipts as soon as possible. Similarly, if you purchase goods from a retailer on or after 1 December and want to recover the VAT, you should only recover 3/23 of the gross price even if a different rate or amount of VAT is shown on the invoice.