VAT - anti-forestalling legislation
As announced in the 2008 Pre-Budget Report, the standard rate of VAT will revert to 17.5% from 1 January 2010. This follows the 13 month temporary reduction to the standard rate of 15% for the period 1 December 2008 to 31 December 2009.
This change is accompanied by new legislation which aims to prevent artificial arrangements being entered into which seek to benefit from the reduced 15% standard rate in respect of supplies made after the standard rate returns to 17.5%.
This measure will impose an extra 2.5% charge on certain transactions which will be payable on the date the standard VAT rate reverts back to 17.5% i.e. 1 January 2010.
Who will be affected?
All persons or businesses registered for VAT who enter into certain arrangements to avoid the effect of the standard rate of VAT reverting to 17.5% from 1 January 2010.
These provisions will have effect in relation to arrangements entered into after 31 March 2009.
This measure was previously announced as part of the 2008 Pre-Budget Report and seeks to prevent businesses which cannot recover all of the VAT charged to them from entering into arrangements to preserve the 15% VAT rate on their purchases.