HM Revenue and Customs has confirmed that the rate of VAT for most firms will revert to 17.5% on January 1 2010, despite pleas for a postponement. HMRC said that all businesses, including contractors with limited companies, who apply the standard rate, will be affected by the move from the date.
From the first week of January, all businesses who charge VAT at the standard rate will have to have new or amended resources in place to reflect their higher prices. Although HMRC has issued new guidance on the VAT reversal, these changes will cost firms about £125m, on top of the £175m they have already spent when VAT was reduced earlier in the year to 15%. The government reduced the VAT rate temporarily from 17.5% to 15% until the end of the year as part of its “fiscal stimulus”.
Business groups say New Year’s Day is not the right time to land firms with a large administration bill, arising from them needing to change pricing or invoicing systems. UK Economists also fear that getting rid of the lower rate of VAT, which has so far had little or no effect on the public’s spending, could hurt consumer confidence at a time when it appears to be returning.
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Filed under: Contractor News, Limited Company Service | Tagged: Contractor, HMRC, Limited Company, VAT
