Reverting back to 17.5% standard rate VAT
The standard rate of VAT will revert back to 17.5% on 1 January 2010 and all businesses who charge VAT at the standard rate will be affected.
HMRC have published new guidance aimed at ensuring that VAT is correctly accounted for and explaining how transactions that span the two VAT rates should be handled.
The guidance is divided into 12 main sections including a general overview on charging the correct VAT rate, sales to non-business customers, claiming VAT back on purchases, updating accounting systems and specific guidance for businesses using special VAT accounting schemes (such as cash accounting).
You should also be aware of the targeted legislation which was introduced in the 2009 Finance Bill to counter any avoidance schemes that seek to take advantage of the 15% rate for supplies of goods and services after 1 January 2010.