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17.5% VAT rate returns

Autumn 2009

The rate of VAT will return to 17.5% from 1 January 2010, after being 15% since 1 December 2008. This may be a good time to maximise the benefit of the lower rate before it is too late – here are a couple of suggestions:

• Any goods invoiced or paid for by 31 December 2009 will still be subject to 15% VAT, even if the goods are delivered to a customer on or after 1 January 2010. However, there are antiavoidance rules that may apply an additional 2.5% charge, if the value of the goods exceeds £100,000 or the invoice is payable more than six months after it is raised. These situations are limited.
• If you or your clients supply services on a continuous basis, then VAT is normally due according to the rate in force when you raise an invoice or receive money from a customer. However, if an invoice raised or payment received on or after 1 January 2010 includes work done before that date, then the 15% VAT can still be charged on the value of that work. The 17.5% VAT rate will only be charged for work carried out on or after 1 January 2010.