From 1st January 2010, the main rate of VAT changes from 15% to 17.5%. On the same date, the flat rate scheme percentages also change.
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We have prepared some useful Q&As that we hope will be helpful in making the change back to the 17.5% standard rate.
We have split the Q&As into three sections as below:
Section A – Flat Rate VAT changes
Section B – Cash Accounting and Flat Rate VAT
Section C – Using Flat Rate VAT and not on the Cash Accounting Scheme
Section A
What are the new Flat Rate Scheme percentages?
| New Flat Rate Scheme percentage rates |  | |
| | |
| | | |
| Category of business | Old Per% | New Per% |
| Accountancy or book-keeping | 11.5 | 13 |
| Advertising | 8.5 | 10 |
| Agricultural services | 7 | 10 |
| Any other activity not listed elsewhere | 9 | 10.5 |
| Architect, civil and structural engineer or surveyor | 11 | 13 |
| Boarding or care of animals | 9.5 | 10.5 |
| Business services that are not listed elsewhere | 9.5 | 10.5 |
| Catering services including restaurant and takeaways | 10.5 | 11 |
| Computer and IT consultancy or data processing | 11.5 | 13 |
| Computer repair services | 10 | 9.5 |
| Dealing in waste or scrap | 8.5 | 9.5 |
| Entertainment or journalism | 9.5 | 11 |
| Estate agency or property management services | 9.5 | 10.5 |
| Farming or agriculture that is not listed elsewhere | 5.5 | 6 |
| Film, radio, television or video production | 9.5 | 11.5 |
| Financial services | 10.5 | 12 |
| Forestry or fishing | 8 | 9.5 |
| General building or construction services* | 7.5 | 8.5 |
| Hairdressing or other beauty treatment services | 10.5 | 11.5 |
| Hiring or renting goods | 7.5 | 8.5 |
| Hotel or accommodation | 8.5 | 9.5 |
| Investigation or security | 9 | 10.5 |
| Labour-only building or construction services* | 11.5 | 13 |
| Laundry or dry-cleaning services | 9.5 | 10.5 |
| Lawyer or legal services | 12 | 13 |
| Library, archive, museum, or other cultural activity | 7.5 | 8.5 |
| Management consultancy | 11 | 12.5 |
| Manufacturing that is not listed elsewhere | 7.5 | 8.5 |
| Manufacturing fabricated metal products | 8.5 | 9.5 |
| Manufacturing food | 7 | 8 |
| Manufacturing yarn, textiles or clothing | 7.5 | 8 |
| Membership organisation | 5.5 | 7 |
| Mining or quarrying | 8 | 9 |
| Packaging | 7.5 | 8 |
| Photography | 8.5 | 10 |
| Post offices | 2 | 4.5 |
| Printing | 6.5 | 7.5 |
| Publishing | 8.5 | 10 |
| Pubs | 5.5 | 6 |
| Real estate activity not listed elsewhere | 11 | 12.5 |
| Repairing personal or household goods | 7.5 | 9 |
| Repairing vehicles | 6.5 | 7.5 |
| Retailing food, confectionary, tobacco, newspapers or children's clothing | 2 | 3.5 |
| Retailing pharmaceuticals, medical goods, cosmetics or toiletries | 6 | 7 |
| Retailing that is not listed elsewhere | 5.5 | 6.5 |
| Retailing vehicles or fuel | 5.5 | 6 |
| Secretarial services | 9.5 | 11.5 |
| Social work | 8 | 10 |
| Sport or recreation | 6 | 7.5 |
| Transport or storage, including couriers, freight, removals and taxis | 8 | 9 |
| Travel agency | 8 | 9.5 |
| Veterinary medicine | 8 | 10 |
| Wholesaling agricultural products | 5.5 | 7 |
| Wholesaling food | 5 | 6.5 |
| Wholesaling that is not listed elsewhere | 6 | 7.5 |
| | | |
| | |
| *Labour-only building or construction services" means building or construction services where the value of materials supplied is less that 10 per cent of relevant turnover from such services; any other building or construction services are "general building or construction services". | | |
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From what date should I use my new percentage?
You should use the new Flat Rate Scheme percentage from 1 January 2010.
I’m newly registered for VAT do I still get a 1% discount for the first year of registration?
Yes. You will continue to receive a 1% discount off the new percentage rate.
Is it possible I could end up using three Flat Rates for the VAT quarter straddling 1 Jan 10?
Yes, but only when you are in the 1% discount period and it comes to an end, in that quarter.
For Example using Computer and IT consultancy or data processing
Sales invoices raised with a VAT rate of 15% you would apply the Flat Rate at 10.5%.
Sales invoices raised with a VAT rate of 17.5% you would apply the Flat Rate at 12%,
Sales invoices raised with 17.5% you would apply the Flat Rate at 13%, after the discount period has ended.
Section B
VAT Cash Accounting Scheme - is there anything I should be aware of?
Yes.
With cash accounting you pay VAT when you receive payments, therefore if you raised a sales invoice on 28th December 09 and you receive payment after 31st December 09, then you would use the old percentage as the sales invoice was raised in December 09 with VAT rate of 15% on the sales invoice.
However, if an invoice was raised in January 10 with a VAT rate of 17.5% you would apply the new rate.
If you’ve charged a VAT inclusive price, the VAT fraction to work out the VAT element is
15% = 3/23
17.5% = 7/47
Section C
I don’t use the Cash Accounting Scheme, is there anything I should be aware
of?
If Invoices are raised with a VAT rate of 15% you will need to apply the old percentage and any invoices raised with a VAT rate of 17.5% you will apply the new percentage.
What happens if I make a mistake applying the new rules?
If you discover that you have made an error, it should be corrected in the following VAT return.
We trust the above has been useful but if you require any further help or guidance please contact us on
Phone 0141 225 6400
Fax 0141 225 6401
E-mail enquiries@grantsca.co.uk
