20% VAT from 4th January 2010

Most businesses should now be aware of the increase in the standard rate of VAT to 20% on 4th Janauary 2010, however, many are still unsure of the detail.  Set out below are a few of the important issues for VAT traders:

Advance Sales

“Can I simply invoice now and receive payment later” – In short yes, provided 4 key test are met.  These are:

  1. There is no connection between supplier and customer
  2. The supplier is not funding the purchase (ie. the supplier lends money to the customer in order that the customer can then purchase the goods).
  3. Payment is due no more than six months after the invoice date.
  4. The pre-invoiced amount does not exceed £100,000 exclusing VAT.