VAT help

Sarah

2 alternatives:

1. The invoice value of all work actually done up to and including the day before the rate rise can be invoiced at the current 17.5% rate even if billed later in January 2011.  Time and fees or other work-in-progress records together with any relevant billable rechargeable costs records would be needed and retained in order to substantiate that value.  You should be able to substantiate this from VAT notices and HMRC online pages.
2. Full payment received prior to the increase date thereby establishing a full tax point date during the present 17.5% rate period.

As a suggestion for the future, all client engagement terms should include terms that state that "invoices will be subject to the addition of VAT at the applicable rate(s) ruling" (or similar) rather than specify a specific rate and do not accept purchase orders that state a specific rate of VAT - obtain amendment which states the VAT exclusive contract value and describes the VAT addition as above but without the "invoices will be" bit.  On the presumption that it is your client who is causing the issue and that you would otherwise be in a position to complete the job within the 17.5% rate period, your client should be prepared to agree to the increased 20% rate being applicable to part of the total charge as it does not effectively cost them anything unless they are unable to recover input VAT.

Hope this helps

Chris

Surely if your client is a "large organisation" they will be VAT registered and will claim back all VAT applied to purchase invoices.
In which case, the rate will not affect the amount they actually pay.

Of course, they could be a company or charity who are not allowed to claim the vat on purchases?

Hi Sarah

The URL link below should go direct to the Business Link pages about this issue.  The entire content of the next para forms the complete URL.  If the link breaks on posting this message, shade and copy the whole para commencing http ...... and ending .....20Legal , paste it into your browser address window and hit the go button.

http://www.businesslink.gov.uk/bdotg/action/layer?=en&itemId=1085342528&lang=en&r.i=1085342508&r.l1=1073858808&r.l2=1083126673&r.l3=1083126862&r.l4=1085334907&r.s=sc&r.t=RESOURCES&site=106&topicId=1085334907&type=RESOURCES#rel=yes&name=vat_increase_20per_cent&cat=Legislation%20/%20Legal 

Regards and have a good Christmas

Chris