For any sales of standard-rated goods or services that you make on or after 4 January 2011 you must charge VAT at the 20 per cent rate.
If you have a cash business and calculate your VAT using the VAT fraction you must use the VAT fraction of 1/6 on your standard-rated VAT inclusive sales from 4 January 2011.
Retailers, you can put up a notice to let your customers know that an adjustment will be made at the till to account for the VAT rate change.
Sales that span the change in rate
There are special rules for sales which span the change of rate. If you provided goods or services before 4 January 2011 and raised a VAT invoice on or after that date you can choose to account for VAT at 17.5 per cent. You don’t need to tell HM Revenue & Customs (HMRC) if you do this.
Services you started before 4 January 2011 but finished afterwards
If you started work on a job before 4 January 2011 but finish afterwards you may account for the work done up to 3 January 2011 at 17.5 per cent and the remainder at 20 per cent. If you choose to do this you will have to be able to demonstrate that the apportionment is fair.
Continuous supplies of services
If you provide a continuous supply of services, such as leasing of photocopiers, you should account for the VAT due whenever you issue a VAT invoice or receive payment, whichever is the earlier. You must charge 20 per cent on invoices you issue and payments you receive on or after 4 January 2011. You may, if you wish, charge 17.5 per cent on the services you provided in the period up to 3 January 2011 and 20 per cent on the remainder. If you choose to do this you will have to be able to demonstrate that the apportionment is fair.
More detailed guidance can be found on the HMRC website.
