VAT - When 15% should be 17.5%

I just wondered if anyone needed some clarification about actually when to change the rate of VAT they charge.

I know our beloved chancellor said it will apply from 1st December but...

There is an issue you must consider here when you are invoicing for the supply of goods and services.

If you supplied goods and services before 17th November 2008 but invoice them on or after 1st December 2008, you MUST use the 17.5% rate.

If you normally invoice at, say, the end of the month following the supply of goods and services (yes, some people wait that long to bill), you will still need to charge 17.5% VAT.

The reason for this anomaly is that HMRC treat the Basic Tax Point as being when the goods/services are actually made available to the client/customer and it is the basic tax point that determines the rate of VAT you charge.

There is, as with most things, a work around.

Why did I use the 17th November above and not the 1st December? It is because VAT has a little known 14 day rule that can overide the the basic tax point.

If you raise an invoice within 14 days of the supply, the invoice date will be the actual tax point. There is a possibility to extend this 14 day rule to 30 days, but you have to write to HMRC at your local VAT Business Centre and explain why you need an extension and if they agree, nearly all your invoicing can be done at 15% after 1st December 2008.

As ever, a VAT inspection is usually the only time this sort of anomaly crops up but when it does, guess what happens??? You get 2 choices.

1. you go back to your customer and say sorry, I should have charged you 17.5% not 15% can you stump up the difference please? What if they have gone out of business or just say no....

2. you pay the difference with no ability to reclaim it.

I have said it before but VAT is the most mis-understood of the taxes and when you get it wrong - it makes more than your eyes water!


Ray Stewart is the MD of Coalville Business Services Limited. He writes articles and reports about bookkeeping and business growth strategies, the two areas of business he is most passionate about. His bookkeeping business website is at and is a free resource for people looking for simple answers to bookkeeping questions and a chance to speak to him for free if you can't find the answer you are looking for. You can also visit his private blog at

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