VAT, which rate ?

[flatsix3.6]

I was invoiced from a company pre VAT decrease which I disputed, have now agreed to revised invoce and wonder should they be adding 17.5% or 15%.

They have added 17.5% my thoughts are it should be 15%.

[Eric Mc]

Are you VAT registered?

[flatsix3.6]

Eric Mc said:

Are you VAT registered?

Yes Eric.

[smartie]

then it should make no difference?

[rsv gone!]

It is my understanding that VAT should be on the rate that the works were first invoiced for; ie 17.5% before December last year.

[Eric Mc]

Exactly.

I'm pretty certain that the rate would be the rate in force at the date the original invoice was raised - otherwise people would be creating disputes just to delay the issuing of a corrected invoice until the lower rate had kicked in.
Conversely, the opposite might start happening when the rate goes back up again - which is what the Government have stated will be happening.

However, all this is academic if your busines is VAT registetred as you will be reclaiming whatever VAT you are charged.

[flatsix3.6]

Cheers all, I know I will be reclaiming it but it's the old cash flow problem in the first instance.

[Eric Mc]

Time your payment to the supplier as close as possible to the submission of the VAT return - therby reduciung the timing difference between the payment and the reclaim.

[JustinP1]

Eric Mc said:

Exactly.

I'm pretty certain that the rate would be the rate in force at the date the original invoice was raised - otherwise people would be creating disputes just to delay the issuing of a corrected invoice until the lower rate had kicked in.
Conversely, the opposite might start happening when the rate goes back up again - which is what the Government have stated will be happening.

However, all this is academic if your busines is VAT registetred as you will be reclaiming whatever VAT you are charged.

Thats right.

The cut off point is when the contract was performed. For example, if you sell something on November 28th, they can't just wait to pay the invoice and chop off 2.5%

Interestingly, if you are providing a service which sandwiches the cut off date, then the HMRC rules are the VAT rate should be the same as the period in which the majority of the service was performed.

For example, a six week job with four weeks in the 17.5% zone would mean the whole invoice should be 15%.

We've already had a couple of local authorities come back and tell us it is 'impossible' to remit an invoice with 17.5% after Dec 1st, but they are wrong.

It just really goes to show how shambolic and ultimately pointless the whole farce is.