VAT rate changes from 4th Jan 2011

The standard rate of VAT rises to 20% from 4th January 2011, and the Flat Rate VAT scheme percentage used by most IT contractors in their tax calculations have also been updated.

For all invoices issued on or after 4th January, the new 20% standard rate should apply.

If you are invoicing for contract work performed which spans the date of the VAT increase, you can choose to charge 17.5% on work carried out before 4th January, and 20% thereafter. Or, you can add 20% on the whole amount if you wish.

For most IT contractors, the percentage used in the Flat Rate calculation rises from 13% to 14.5% to accommodate the rise in the standard rate.

For more information, read HMRC's PDF guide to the VAT change (including the new Flat Rate percentages).

If any Clarity clients have any queries relating to the change, please don't hesitate to contact your account manager.