VAT Rate Change
On the 1st January 2010 the standard rate of VAT will increase to 17.5% 
The pending change in VAT is a source of worry to many freelancers, contractors and limited company owners. This article provides the answers to some basic queries:
Is it just a case of raising invoices to 17.5% in January?
The 'basic taxpoint' is the date on which the supply was actually made. If an invoice is raised more than 14 days after the basic taxpoint than the taxpoint reverts to the original date of supply rather than taking the invoice date. Therefore invoices and supplies made before 17 December are subject to the old rate of VAT. However, if you make any continuous supplies or issue a annual invoice for an ongoing service you should check more detailed guidance to ensure the you give the correct rate.
What about cash accounting?
The taxpoint determines the rate of VAT change and this does not change when you use cash accounting. If you have a good accounting software system then rate should change automatically. If you are calculating your own VAT, you will need to be careful with your returns in the first half of 2010, and make sure that you identify the amount of VAT shown on the original invoice.
What about the Flat Rate Scheme?
The Flat Rate Scheme percentage changes on 1st January as well. You will need to use the HMRC list issued on the 9th December in order to correctly complete returns due after that date. When calculating your Flat Rate VAT you will need to separate out the money coming in for December and earlier supplies, from January and subsequent supplies. This will make it possible to apply the two different VAT rates correctly and ensure that you don't pay too much.
What about recovering VAT?
This should be simple as the VAT you recover is shown on the VAT invoice you have received. However if you think that the VAT has been shown incorrectly don't try and recover it yourself. Instead take it up with your supplier and get a new invoice issued.
