Spring 2009 Newsletter Content Oh for a little hindsight Can't pay, won't pay? Shock in Essex Car tax You signed it Don't be late Age before beauty? IHT and falling prices More paper Shopping around Less paper PAYE or not PAYE... Flat rate scheme A change of heart There are limits Do your duty Free lunch VAT a mess Dissatisfaction guaranteed Don't believe it! Too late Tax on tick £100 note Temp reminder

VAT a mess It's not yet clear whether the temporary cut in the standard rate of VAT will rescue us from recession, but it has certainly kept a lot of people busy since it was announced in the Pre-Budget Report in November. After three changes of rate in 35 years, we have two in 13 months. As usual, the rules aren't simple and there's plenty of scope for error. HMRC say they will apply "a light touch" when dealing with the rate change - at least they recognise that it's human to make mistakes. For example, if you use the cash accounting scheme you usually take the VAT fraction - was 7/47, is now 3/23 - of the cash received from customers. That's your output tax. It's simpler than having to work out the VAT in your debtors when you send out an invoice. Unfortunately, it doesn't work that way on a rate change: if you charged 17.5% VAT to your customer before 1 December, you have to apply 7/47 even if the cash comes in later. In some circumstances you can issue a credit note and refund the difference to the customer - your choice - but you can't simply collect 117.5% of your bill and send only 3/23 of it to HMRC. There are plenty of other details on a change of rate that can go wrong, and we know we'll have to do it all again for 1 January 2010. If you want advice on the rules, we are here to help.