VAT on providing a daily service whilst billing monthly and the VAT change in 2011

[DimPrawn]

Question on how to calculate VAT on an invoice.

Suppose MyCo Ltd is not on the flat rate scheme and bills BigCo for a service provided on a daily basis 7 days a week.

This service is invoiced as days in the month (e.g. 31) x rate + VAT and invoices are raised say middle of each month and cover for example 15th December to 15th January.

Now what would I bill as the VAT part in Jan 2011 when the VAT rate changes from 17.5% to 20% on the 4th Jan 2011, which is part way through an invoice period?

Do I have the calculate the VAT as two amounts or can you apply either the previous or new VAT rate for the whole invoice?

Don't want to get this wrong and upset both the customer and VAT man.

Thanks,

DP

[moorfield]

Charge separately ie 15-31 Dec @ 17.5%, 1-4 Jan @ 20%.

[Clare@InTouch]

Apportion the invoice to the different VAT periods or charge the whole lot at 20%:

"You may make a single supply of a service which is nevertheless carried out over a period which commences before 4 January 2011 but is not completed until after that date (e.g. decorating a house). Unless you have received payment or issued a VAT invoice before 4 January 2011, the whole supply should be charged at the 20 per cent rate under the normal rules. However, you may if you wish, charge VAT at 17.5 per cent on the work done up to 3 January 2011 and 20 per cent on the remainder. You will have to be able to demonstrate that the apportionment between the two amounts accurately reflects the work done in each period."

http://www.hmrc.gov.uk/vat/forms-rat...e-guidance.pdf

[DimPrawn]

Apportion the invoice to the different VAT periods or charge the whole lot at 20%:

"You may make a single supply of a service which is nevertheless carried out over a period which commences before 4 January 2011 but is not completed until after that date (e.g. decorating a house). Unless you have received payment or issued a VAT invoice before 4 January 2011, the whole supply should be charged at the 20 per cent rate under the normal rules. However, you may if you wish, charge VAT at 17.5 per cent on the work done up to 3 January 2011 and 20 per cent on the remainder. You will have to be able to demonstrate that the apportionment between the two amounts accurately reflects the work done in each period."

http://www.hmrc.gov.uk/vat/forms-rat...e-guidance.pdf

Thanks Clare.

Unless I'm reading it wrong, look like I can away with charging a single invoice for that month with VAT at 20%, which makes life easier.

[Clare@InTouch]

Thanks Clare.

Unless I'm reading it wrong, look like I can away with charging a single invoice for that month with VAT at 20%, which makes life easier.

I agree.

If you charge the whole lot at 20% and you're on flat rate you may get that tiny extra profit too as the percentages for IT are in your favour - 13% to 14.5%.