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VAT Increase

cityboy
Newbie
Posts: 1
Registered: 14-07-2008

VAT Increase

I notice that PlusNet have charged 20% VAT on the telephone call element of my bill dated 6th Jan. As calls were made prior to the rate change PlusNet could have applied the old rate.  Not a lot of money but multiply that by a few thousand customers... Whatever, it's not giving their customers the best deal.
3 REPLIES
Community Veteran
Posts: 14,469
Registered: 30-07-2007

Re: VAT Increase

My understanding is when an invoice is raised you must use the current VAT rate on the date of invoicing and not the rate that may have applied when the goods or service was used. So PN were correct in applying 20% VAT for any invoices raised on or after 4th Jan 2011.
Community Veteran
Posts: 1,100
Registered: 05-04-2007

Re: VAT Increase

The following is taken from HM Revune & Customs website:
[quote=http://www.hmrc.gov.uk/vat/forms-rates/rates/rate-increase.htm#2]Sales that span the change in rate
There are special rules for sales which span the change of rate. If you provided goods or services before 4 January 2011 and raised a VAT invoice on or after that date you can choose to account for VAT at 17.5 per cent. You don't need to tell HM Revenue & Customs (HMRC) if you do this.
Services you started before 4 January 2011 but finished afterwards
If you started work on a job before 4 January 2011 but finish afterwards you may account for the work done up to 3 January 2011 at 17.5 per cent and the remainder at 20 per cent. If you choose to do this you will have to be able to demonstrate that the apportionment is fair.
Continuous supplies of services
If you provide a continuous supply of services, such as leasing of photocopiers, you should account for the VAT due whenever you issue a VAT invoice or receive payment, whichever is the earlier. You must charge 20 per cent on invoices you issue and payments you receive on or after 4 January 2011. You may, if you wish, charge 17.5 per cent on the services you provided in the period up to 3 January 2011 and 20 per cent on the remainder. If you choose to do this you will have to be able to demonstrate that the apportionment is fair.
So from my understanding Plusnet could have chosen to charge 17.5% VAT prior to the 4th Jan but do not have to. However by charging 20% VAT for the whole period then this is the amount that as to be paid to HMR&C.
gswindale
Grafter
Posts: 942
Registered: 05-04-2007

Re: VAT Increase

What PN appear to have done is what most companies will be doing.  I seem to recall getting notification from several utility suppliers stating that all bills issued after 4th Jan would be at 20% rate.
It becomes more confusing when dealing with things on a cash-basis though - you send a payment request out in Dec showing 17.5% VAT on it - receive the payment after 4th Jan and have to take the gross figure and work back the VAT and request the balance.