PBR 2008: Analysis - The VAT nightmare before Christmas - By Mark Lee

Neil; You must remember that the cash accounting scheme only allows you to account for your VAT liability when you receive payment. It does not affect the tax point. The tax point is the time that the sale is made under the law and it determines the rate of tax applicable.
The administrative burden of this change will be unbelievable on SME's especially at one of the busiest times of the year.

We are running an online survey to ask all our clients, accountant partners and contacts what do they really want to do about the new VAT rate... contribute your view.

Results will be published Friday 10am GMT on our VAT rate information page.

Andrew
Pearl

One of the many things I find staggering about the VAT cut is not only that it's going to be taken away again, but WHEN it's going to be taken away.

1st January 2010.

January? Isn't that the busiest time of the year for accountants?

We've been dumped on again guys.

The sooner it becomes law that the Chancellor has to be a qualified accountant with plenty of experience of small business, the better, say I.

M

With this VAT reduction it is possible to make an extra 2.5% profit, if you use VAT cash Accounting. If you receive money but don't bank it until Dec 01 you will have input tax @ 15% and not the 17.5% that you invoiced at.

Am I right or am I wrong? If I am right do you think the Mr Darling's and the Gordon knows this!

Interesting that HMRC's website is specific about continuing services that the VAT rate to be charged is the rate in force at the date of payment or invoice date. We apparently do not have to split as professionals our charge as pre and post change based on when the work was done - like we did when the last change happened. I was surprised by this advice so phone helpline at HMRC who have confirmed that the tax point for all the work we have done, regardless of when it was done, is charged VAT at the time when we invoice or are paid. With most tax returns getting finished and presumably billed during December and January there are going to be a lot of happy clients!

Yes, indeed it is going to be a busy week or so for everyone. 6 days is just too tight to make the changes required to ensure that websites raise the correct VAT invoices, for a start. On a different note, I think this will be a great case study for the benefits of SaaS, where all users systems are updated on their behalf, overnight.
Pearl software

a £20bn tax giveaway but (on balance sheet) borrowing is to double - that's a pretty large amount of money he has made disappear, A lot more than £20bn I think!