I think I have the new VAT rate change worked out...
The logic is simple, and always has been simple.
The VAT rate applicable is the one at the tax point.
Suppliers can, optionally, bill in advance and split on the date of VAT change, but they do not have to, and it is the suppliers choice.
So, for 1st January invoices that are for services for all of January, the VAT rate is 17.5%. Simples!
Unfortunately the Finance Act adds some extra confusion. In almost all cases that does not cause us a problem, but I think it does for a few of the invoices.
Basically, if the customer is a connected party (i.e. family member, a related company, etc), and they cannot reclaim VAT, then they have to be charged a supplementary 2.5% VAT on the period after the VAT change. This also applies in some other cases such as invoices over £100,000, but that is not an issue.
So, for the most part the invoices are as normal, and no problem.
However, I expect I'll have to charge my parents a supplementary 2.5% VAT from 4th January until the next full moon (they are invoiced every full moon). I probably should try and work out if employees count as "connected parties" too. That is assuming being parent of director of the company makes them "connected" - I'll have to read another Act to check that, or maybe I'll just email HMRC...
Why the hell make is so damn complicated? Arrrrg!
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I have emailed HMRC giving my parents as an example and explaining they are invoiced every full moon so would have to pay 2.5% extra for 4th to 19th Jan, probably 30p or so. I said I like to do things right :-)
ReplyDelete"The VAT rate applicable is the tax point" - I don't think you meant that - the "tax point" is a date/time, not a VAT rate.
ReplyDeleteFYI HMRC replied and either did not read, or were not "phased" by mention of full moon billing :-)
ReplyDeleteSounds like the only parties that are "connected" are me as director and my wife, so only my personal invoice for internet services will need the magic 2.5% supplementary invoice. What fun!
Nothing to do with this story, but i found you some marmite choc and have sent it home with sandra xxx
ReplyDelete