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Change of VAT rate on 1 January 2010 A change in the VAT rate from 15% to 17.5% took place on 1 January 2010. This change affects any VAT registered business that sells or purchases goods or services that are subject to the standard rate of VAT.

For most business's it is a straight forward change, any invoices raised on or after 1.1.10 will need to apply the new vat rate of 17.5 %. For business's that offer services that span over the two vat rates there are special rules that can be used. This will be useful if you supply to non vat registered business's or charities, it is essential to help your customers by invoicing at the appropriate rate when the goods were supplied or the service took place, this will enable them to benefit from the 15% rate for as long as possible. If your sale spans the change in the vat rate you can invoice for the part of the service or goods supplied up to 31.12.09 at 15% and then service or goods supplied after 1.1.10 at 17.5%. It is important though to keep accurate records and back up evidence of the supply date. For services this may be diary dates when the work took place. Time sheets showing what was done and when. For goods this could be signed delivery notes, orders etc.

If you take deposits and you took a deposit in December for goods or services supplied in January, then the deposit should be treated with 15% vat and the balance received after 1.1.10 at 17.5% vat.

For more detailed guidance on all issues relating to the change in vat rate you can find the full HMRC guidance sheet at HMRC.