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Emergency Budget: comment from the tax bar on VAT

Exactly as predicted in my article of 5 April the new Chancellor raised the standard rate of VAT to 20%. The good news for consumers is that this is postponed to 4 January 2010. For suppliers of goods and services however the bad news is that the increase needs to be considered well before that date and potentially involves a compliance nightmare. The usual rules about apportionment will apply to supplies spanning the change of rate.

But in addition there is an overlay of anti-forestalling rules to be enacted in the Finance (No.2) Act 2010. These rules will be complex and convoluted; and are the subject of a lengthy Guidance Note prepared by HMRC. They are aimed to prevent the manipulation of tax points through pre-invoicing or pre-payment in cases where goods are delivered or services provided after 4 January 2010.

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