From 4 January 2011, the standard rate of VAT will increase to 20%. The burden of the increase will be felt unevenly across business sectors but the burden of the real cost may be more about market conditions than tax law. For some the issue will be one of having to account for increased output tax, for others the prospect of increased irrecoverable input tax. However, the effect may ripple down the supply chain. We can expect an increased focus on claiming VAT reliefs, but any planning structures will need to overcome robust anti-avoidance legislation and case law.
