Retail businesses need to be aware the standard rate of VAT on goods and services will once again revert to 17.5% from 1st January 2010. The timing of this change is far from ideal for retailers, as it falls in the middle of the busiest trading period of the year.
There are a number of administrative issues for retail businesses to address before the increase comes into effect.
From 1 January 2010 retailers should alter their VAT accounting processes so that they account to HMRC for output tax at the correct rate and claim credit for input tax at the correct rate. If retailers intend to pass the VAT standard rate increase on to their customers then tills must be adjusted to charge VAT at 17.5% or the goods should be re-priced. Procedures for dealing with VAT on refunded goods, which usually peak after Christmas, also need to be put in place.