VAT update
November 2009
VAT rate increase on 1 January 2010
The current temporary reduction in the standard rate of VAT
will end on 31 December 2009. With effect from 1 January
2010, the VAT rate will revert back to 17.5%. HMRC has
recently announced that retail businesses remaining open
past midnight on New Year's eve will be allowed to continue
charging VAT at 15% on their sales until they close or until
6.00am on 1 January 2010. There has been press
speculation that the rate could be increased to 18% or 19%,
to generate much needed revenue for the Government. At
the time of going to print, this remains speculation.
Businesses should ensure that they are ready for the
change. Systems may have to cope with both VAT rates
during the transitional period, for sales and purchases.
The normal tax point rules will determine which VAT rate to
apply to supplies of goods and services, however,
Cross border changes
In our January 2009 VAT update, we reported on some
proposed changes to cross border transactions involving
both suppliers and recipients of cross border services.
These changes will come into effect on 1 January 2010.
The main change will be to the place of supply of business
to business supplies of services. The general rule will be
that the place of supply of such services will be where the
customer is established (and not as now, where the supplier
is established). As always, however, there will be exceptions
to the general rule (land, hiring of certain means of transport
and cultural, sporting, scientific and educational services).
The VAT rules for business to consumer supplies will remain
unchanged for now.
The time of supply for reverse charge services will change
from the invoice date to the earlier of:
• Businesses should now be considering how the new rules
completion of the service, or
• the receipt of payment.
EC Sales Lists (ESLs) currently required for Intra EU
supplies of goods to VAT registered customers will also be
required for Intra EU supplies of services, covered by the
general rule and where the customer is required to account
for VAT under the reverse charge procedure.
ESLs for services will have to be reported on a calendar
quarterly basis.
www.mercerhole.co.uk
businesses can choose to apply special transitional rules.
These rules deal with supplies which span the rate change
and how to treat deposits, pre-payments etc.
Anti-forestalling legislation was introduced in the Finance Act
2009 to prevent abuse of the increase in the VAT rate, eg
making unusually large prepayments. However, these rules
should not affect the majority of normal business
transactions.
HMRC have published detailed guidance on their website to
assist businesses to deal with the change and have set out
full details of the anti-forestalling rules. The good news is
that they have indicated that they will apply a 'light touch' to
any errors made in the first VAT return submitted after the
change in rate.
ESLs for goods will also be subject to a number of changes
from 1 January next year:
• For quarterly value of supplies of intra EU goods above
£70,000 (based on previous four calendar quarters), the
reporting period will be one month (currently quarterly).
• For quarterly value of supplies of intra EU goods below
£70,000, the reporting period will be calendar quarterly.
However, a business can opt to file both ESLs monthly.
Filing can be on paper or electronically. The filing deadline
for the paper option will be 14 days from the period end and
21 days for electronic filing. The current form VAT 101 will
be used for both goods and services (indicator code 3 for
services).
will affect them and what changes may be needed to capture
the relevant data. The first stage will be to obtain overseas
customers’ VAT numbers.
...continued
Also featured in this issue:
• Online VAT returns - a reminder
• Agent update
Cross border changes (...continued)

Businesses which pay overseas VAT and currently submit
refund claims to overseas tax authorities should be aware
that a new electronic refund system will also be introduced
from 1 January 2010. The main change is that claims will
now be submitted via a UK portal on the Government
Gateway and forwarded onto the Member State of Refund
(MSR). New deadlines have been set both for submission
and refund of the claim. Further details are available on
HMRC's website.

Online VAT returns - a reminder

The deadline for compulsory online filing of VAT returns is • Telephone banking
nearly upon us. With effect from 1 April 2010, all businesses
with a turnover above £100,000 and all newly VAT registered • Debit/Credit card over internet using Billpay
businesses will have to submit VAT returns online and pay by
electronic means. Businesses with a turnover below • BACS direct credit
£100,000 can continue to file paper returns until 2012.
• CHAPS
The current ways to pay electronically are:
• Bank giro credit transfer (cash or cheque at certain
• Direct debit banks/building societies).

• Internet banking Some of these electronic payment methods allow extra time
(seven days) to file and pay the return.

Agent update
Currently businesses wishing to authorise an agent to deal
with their VAT affairs have to complete a form 64-8 and
submit this by post to HMRC. HMRC have recently
announced it will soon be possible to deal with VAT
authorisations via the online service (Online Agent
Authorisation Service) currently available for other taxes. It
is anticipated that this service will be available from late
November 2009.

Sign up to... http://www.taxplusblog.com

Tax Plus, SME Plus, Insolvencyblog, People Plus http://www.smeplusblog.com

and News & Views blogs - featuring regularly
http://www.insolvencyblog.com
updated information, comment and ideas from
http://www.mercerhole.co.uk/news/people-blog
Mercer & Hole’s experts.

http://www.mercerhole.co.uk/news/news-blog/

For further information please call Jane Stacey + 44 (0) 1727 898957 or your normal contact at any of the offices below.

St. Albans London Milton Keynes Northampton

Gloucester House International Press Centre Silbury Court 300 Pavilion Drive
72 London Road 76 Shoe Lane 420 Silbury Boulevard Northampton Business Park
St. Albans London Central Milton Keynes Northampton
Hertfordshire EC4A 3JB MK9 2AF NN4 7YE
AL1 1NS
Tel: (01727) 869141 Tel: (020) 7353 1597 Tel: (01908) 605552 Tel: (01604) 669330
Fax: (01727) 869149 Fax: (020) 7353 1748 Fax: (01908) 677433 Fax: (01604) 702000
stalbans@mercerhole.co.uk london@mercerhole.co.uk miltonkeynes@mercerhole.co.uk northampton@mercerhole.co.uk
DX: 6121 St. Albans DX: 469 London/Chancery Lane DX: 54467 Milton Keynes

This newsletter is a short selection of items which may be of interest extracted from
complex legislation. Further specific advice on any matter referred to must be taken at
all times. No part of this publication may be reproduced without the prior permission
of Mercer & Hole. The information is given for general guidance only and publication
is without responsibility for loss occasioned to any person acting or refraining from
acting as a result of the information given.
Mercer & Hole is registered by the Institute of Chartered Accountants in England &
Wales to carry out company audit work. Financial Services provided by M&H LLP
trading as Nightingale Associates. Nightingale Associates is authorised and regulated
by the Financial Services Authority.

www.mercerhole.co.uk