VAT rate change

The world is awash with advice and assistance as regards how to avoid the increase – up to 20% on 4/1/11, if you didn’t already know. In that light, I will add a shortened version on how to avoid it:

Buy it before 4/1/11 – VAT remains at 17.5%.

Have the service, whatever it might be, performed before 4/1/11. VAT remains at 17.5%.

So far so good, but it’s not rocket science is it?

OK, so the obvious trick is to get something being provided after 4/1 to be subject to 17.5% VAT. How is that done?

Plan A – pay for something in advance, be it goods or services. As long as they have the money in the bank before 4/1/11, it will be chargeable at 17.5%. Obviously this isn’t terribly good advice, if there is the faintest possibility that the supplier will run off with your money, so please take care before doing that!

Plan B – Have the supplier invoice the goods or services prior to 4/1/11.

Both Plan A and Plan B are slightly offensive to H M Revenue & Customs, and as a result they have said that they won’t work if any of the following apply:

a) Supplier and customer are “connected” – husband/wife/associated companies etc.; or
b) The value is greater than £100k exc VAT; or
c) The invoice doesn’t have to be paid in full within 6 months; or
d) If any prepayment is funded by the supplier.

Clearly there could be other implications especially if services overlap the date of the increase.  Please let me know if you require any further information.

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