June 23, 2010 | Dave Brown | Leave a comment Thankfully, the Budget was devoid of many significant VAT changes. OK, the VAT rate is going up to 20% on 4 January 2011 but that is as exciting as it gets. That gives us time to prepare, and as with the January 2010 rise of 2½%, did we really notice? Full marks to the Chancellor, however, for giving us time to prepare for the change and, where possible, to make a pre-payment whilst the VAT rate is still at 17.5%. However, anti-forestalling measures will be in place, to prevent pre-payments in certain circumstances. These will mostly affect connected parties, where the recipient of the supply is not in a position to reclaim the VAT. Alternatively, still with individuals of businesses that cannot reclaim VAT, a pre-payment will not work if the value of the supply is in excess of £100,000. Other changes are limited in their application, but here they are: 1) Flat rate scheme – a consequential result of the VAT rate change is that the flat rate scheme percentages will also be changing from 1/1/2011. 2) Aircraft: in essence, zero rating presently applies to aircraft over a certain size. HMRC are switching to a qualifying definition based on the status of the customer. This will mean that zero rating will apply to aircraft used by airlines “ operating for reward” primarily on international routes. 3) Gas, heat and cooling: a change to the ‘place of supply’ rules is proposed, which will mostly affect cross-border supplies. 4) Postal services: the only supplier to be affected is Royal Mail (Royal Mail Holdings PLC) but effectively all businesses might find that VAT is charged on certain services that were previously exempt from VAT – mostly parcel deliveries. “Social mail” remains unaffected. 5) “Lennartz” accounting: taxpayers buying assets (eg land, property, boats and aircraft) which have business and private use have hitherto been allowed to reclaim the full VAT ‘upfront’ and simply repay the private element, according to their future use of the asset. This facility will be withdrawn, with only the business element being recoverable upfront.