VAT Notice
Two important VAT changes become effective on 1 January 2010. The first change is the
reversion of the standard rate of VAT to 17.5% and the second change (referred to as the ‘vat
package’) introduces:
1) New rules as to when to charge VAT on supplies to countries within the European
Union (EU).
2) The imposition of UK VAT on services provided to the University from suppliers
outside the EU.
3) A new methodology for reclaiming certain VAT incurred on expenditure within the
EU.
1.
Reversion to the Standard Rate of 17.5%
With effect from 1 January 2010 the standard rate of VAT will revert to 17.5% and the
following potential issues have been identified:
1.1
Impact on Purchases of goods and services
a) If a supplier charges VAT at 17.5% in the new year for goods or services
delivered on or before 31 December 2009, you can request a credit note for the
2.5% difference up to 14 February 2010. The decision as to whether to request
a credit note will depend on the value and credit notes should not be requested
where the sum involved is very small.
b) For services which span 31 December, the supplier should split the invoice on
a “fair and reasonable” basis between the two VAT rates.
1.2
Raising of University sales invoices
a) Where possible, and where VAT is applicable, sales invoices should be raised
up to 31 December for goods delivered and services completed to that date
using a VAT rate of 15%.
b) Where this is not possible, it will be necessary to split the invoice for services
which span 31 December on a “fair and reasonable basis”
c) If it becomes necessary to issue a credit note in the new year, the rate of VAT
on the credit note is determined by the rate prevailing on the original invoice.
1.3
Other Considerations
a) Update any spreadsheets that automatically calculate VAT.
b) Empty and bank any monies from coin machines to 31 December.
c) Change any till receipts to reflect the new rate of VAT.
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d) Check VAT invoices received in January to ensure the correct rate has been
applied.
2.
VAT Package
2.1
Changes to the rules determining whether to charge VAT to customers
within the European Union (EU).
To determine whether to charge VAT to customers within the EU, two new rules
become effective from 1 January 2010.
i) B2B – Business to Business
The general rule for supplies of services to business is that ‘the supply is made where
the business customer belongs’.
Therefore, if the business customer belongs outside the UK, the supply is outside the
scope of UK VAT and the supply is not subject to VAT.
However, there are two exceptions to this rule in relation to:
a)
b)
‘land related services’ e.g. provision of conference facilities
Clinical trials
and in these two cases, the VAT rate is determined by where the land itself is located
or where the clinical trials take place regardless of where the customer belongs.
Furthermore, in all cases where there is a requirement to charge VAT to EU business
customers, the legislation requires that the customer’s VAT registration number be
quoted on University sales invoices.
To ensure that the University quotes a valid EU VAT registration number, staff
raising sales invoices should verify the validity of the VAT registration number at the
following address:
http://ec.europa.eu/taxation_customs/vies/vieshome.do?selectedLanguage=EN
ii )
B2C – Business to Consumer
The general rule for supplies of services is that ‘the supply is made where the supplier
(i.e. the University) belongs’.
In this case you MUST charge UK VAT on all sales invoices irrespective of where
the consumer ( ie customer )belongs.
For the purposes of this definition, a ‘consumer’ includes, private individuals,
charities, government departments, (with no business activity) and a person receiving
the supply wholly for private purposes.
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2.2
Extension of the ‘reverse charge’ rules.
The University currently suffers VAT on purchases of goods and services supplied
from within the EU via a mechanism known as reverse charging whereby in
circumstances when the supplier has not charged foreign VAT, the University has had
to charge itself UK VAT and pay over to HMRC accordingly.
The new VAT package extends the scope of reverse charging to now include services
(but not goods) from anywhere in the world. This means, for example, that agents
commission incurred in India and Malaysia etc will become subject to UK VAT.
2.3
VAT incurred in the EU from 1 January 2010
From 1 January, a new mechanism for recovering VAT suffered on expenditure
incurred within the EU is being introduced. However, because of the University’s
VAT status, this is only applicable to project codes and cost centres which can fully
recover VAT.
Where a recovery situation arises, the University will make the appropriate claim to
HMRC and Departments will be credited with any VAT refund.
If you require any further help or advice please feel free to contact Tina Bleasdale at:T.Bleasdale@lancaster.ac.uk
Tele: 592078
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