Sales, Use and International Tax Activity Update - November 2009

It’s Midnight Cinderella. Do You Know Your VAT Rate?

The decrease in the standard VAT rate to 15% effective December 1, 2008 is scheduled to expire on December 31, 2009 at which time the rate will revert back to 17.5%.

Rather than cause retailers and telecoms to spoil the fun of New Year revelers by ringing in the new rate along with the New Year HMRC is deferring the increase for six hours or the close of business whichever comes first. The government recognizes that it would be very difficult to require pubs, restaurants, telecoms and other businesses that remain open after midnight to make the changes to charge 17.5% at the stroke of twelve.

The temporary extension of the 15% rate will not apply to businesses that account for VAT on an invoice basis, on-line or mail order sales, coin operated machines or prepayments for supplies to be made after 6am on January 1, 2010.

The temporary rate reduction from 17.5% to 15% was enacted in 2008 to spur retail sales and help support the slumping economy in the global recession.

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