HM Revenue & Customs (HMRC) director of CT & VAT, Jim Harra, said: "With the Christmas and New Year holidays almost upon us, businesses must be ready to implement the increase to the standard rate of VAT.
“Don’t leave it until the last minute to make any necessary changes to your book-keeping and accounting systems including invoicing and tills. You also need to make sure your staff are fully aware that the new 20% rate must be charged from 4 January.”
Retailers must charge the new 20% rate on all standard-rated takings received on or after 4 January 2011. But if a customer pays on or after that date for something they take away (or have delivered) before 4 January, the sale takes place before the rate change and the 17.5% rate should be used.
Retailers who use electronic tills will have to reprogramme them, so that the correct VAT rate is calculated and shown on till receipts.
Normally, businesses must use the 20% rate for all VAT invoices they issue on or after 4 January 2011, which are issued within 14 days (or a longer period previously agreed with HMRC) of goods or services being provided. However, where goods or services are supplied before 4 January businesses can choose to charge the VAT at the old rate of 17.5%.
If a business receives a purchase invoice dated on or after 4 January which shows the VAT at 17.5%, only the actual amount shown can be reclaimed.
Consumers should be aware that although the 20% VAT rate should be charged on all standard-rated sales from 4 January onwards, there will be occasions when they might be charged at the current 17.5% rate. If in any doubt as to whether this is correct, they should contact the vendor for an explanation.
General information about the VAT rate change can also be found online at www.businesslink.gov.uk/vatratechange.