VAT DEPOSIT PAYMENTS AND THE CHANGE IN RATE TO 20%.

The standard VAT rate is due to increase from 17.5% to 20% from 4 January 2011. Preparing for and dealing with this change will generate an administration burden for most VAT registered businesses. However, there are some special rules relating to this change to help ease the way for some businesses.

General rule

The normal rule is that you should account for VAT on a deposit or payment on account at the rate in force when you receive it. If you receive a deposit before 4 January 2011 for goods or services that you will supply on or after that date the 17.5 % rate of VAT will apply to the deposit and 20 % will apply to the balance.

Special rules

There are optional change-of-rate rules that you may be interested in applying. You can apply the rules selectively to different customers. Also, you can adopt them without notifying HMRC.

• Goods or services provided before 4 January 2011 but invoiced after – The change of rate rules may be used where you provide goods or perform services before 4 January 2011 and raise a VAT invoice and, in some cases, receive a payment after the rate change.

If you issue a VAT invoice on or after 4 January 2011, for goods you provided, or services that you completed before 4 January 2011, you can, if you wish, apply the 17.5% rate. However, you must ensure that the invoice is paid within six months of the invoice date to qualify for this special rule.

• Goods or services provided after 4 January 2011 but invoiced before –You can also opt to use the rules where you receive a payment or raise a VAT invoice before 4 January 2011 for goods or services you will be providing on or after that date. Under the normal rules you should account for VAT at 17.5%.

However, under the special rules you may account for VAT at 20%, not 17.5%, on the payment or amount invoiced before 4 January 2011.

• Continuous supplies – If you make a continuous supply of goods or services (e.g. leasing equipment) you may account for VAT at the 17.5% rate on that part of the supply made before 4 January 2011. This is the case, even if the normal tax point occurs later (for example, where a payment is received in arrears of the supply).

If you decide to do this, you should account for VAT at 17.5% on the value of the goods actually supplied or services actually performed before 4 January 2011, and at 20% on the value of the goods actually supplied or services actually performed after;

• Anti-forestalling rules – Please be aware that there is anti-forestalling legislation in place so it is important to account for the VAT correctly during the change over. If you have any queries or require some assistance with this please contact us.




CURRENT NATIONAL MINIMUM WAGE RATES AS FROM 1 October 2010.

There are different levels of National Minimum Wage depending on your age and whether you are an apprentice. The current rates are:

• £5.93 - the main rate for workers aged 21 and over
• £4.92 - the 18-20 age rate
• £3.64 - the 16-17 age rate for workers above school leaving age but under 18
• £2.50 - the apprentice rate, for apprentices under 19 years or 19 or over and in the first year of their apprenticeship

The age at which you become entitled to the main rate was reduced from 22 to 21 on 1 October 2010. The apprentice rate was introduced on the same date. If you are of compulsory school age you are not entitled to the National Minimum Wage. Some of your other employment rights are also different.




STARTER/LEAVER FORMS P45 AND P46.

From April 2011, all employers must file starter and leaver forms P45 and P46 on line, HMRC will impose penalties on any employers not doing so.




THE PENSION ACT 2008

From 2012 employers will have a duty to automatically enrol staff into a qualifying workplace pension scheme, register with the regulator how they have fulfilled this duty, make a minimum contribution of 3% of pay to an employee’s pension scheme and allow a genuine opt out procedure for job holders.

Implementation is planned for 2012 and the process will start with larger employers first. Newly formed and small businesses will not go live until 2016 with the employers’ contributions starting at 1%.

Further information can be found at www.thepensionsregulator.gov.uk


Best wishes

Sally Gardner ACA

Katie Watson ACCA