Broadly if you raise a sales invoice on or after 4 January 2011 you should use the new (20%) rate of VAT. When dealing with suppliers invoices you should be guided by the date and therefore the VAT rate they have used.
If you use one of the special schemes for small businesses, there are special rules to consider.
Flat rate scheme : the rates will be increasing and you should check the new rate for your particular industry.
Cash accounting : remember that the invoice date normally sets the VAT rate not the date payment is received.
For most businesses using accounting software, the key is to make the appropriate change and be very careful to date entries correctly.
There are various anti-avoidance provisions to stop people abusing the change but as long as you are invoicing your customers normally, you are not likely to fall foul of these. If you are thinking of trying to encourage customers to pay up front to get the lower VAT rate, speak to us or you accountant to make sure your proposal works.
There is a helpsheet on our website covering the basic principles and how to make changes within Sage accounting software www.hjssolutions.co.uk
