20% VAT Increase

Now we have the VAT Increase to 20% on standard rate VAT.
The standard rate of VAT increased from 17.5 % to 20 % on 4 January 2011.
Any sales of standard-rated goods or services that you make on or after 4 January 2011 you must charge VAT at the 20 per cent rate. If you have a cash business and calculate your VAT using the VAT fraction you must use the VAT fraction of 1/6 on your standard-rated VAT inclusive sales from 4 January 2011. That is to get the VAT out of the inclusive gross figure multiply your gross inclusive figure by 1/6 (1 over 6). The older fraction was 7/47 for the 17.5% vat rate.
The change only applies to the standard VAT rate. There are no changes to sales that are zero-rated or reduced-rated for VAT. Similarly, there are no changes to the VAT exemptions. Any sales you make at these rates are unaffected by this change.

A note for those who are part of the vat schemes available will need to be aware that this effects the following schemes:
Flat Rate Schemes (FRS)although you multiply the gross sales figures by the FRS rate for the business to get the vat payable, but it is useful to find out what the vat amount is included if you make inclusive sales. Simply multiply the sales figure by 1/6 to get the vat figure included.
Margin Schemes -where you apply the fraction to the the difference between the gross sales and the purchase price of the second hand item (margin), to get the vat amount payable.The margin scheme has many restrictions but is useful for businesses that cannot reclaim the vat on their second hand purchases for resale, but, nevertheless have to be VAT registered. Beware of the fact that the standard approach has to be used alongside the margin approach if vat is reclaimable ie vat included on a purchase(separately stated on the purchase invoice). Simply refraining from claimimg the vat back is not an excuse to include in the margin scheme.
Still enough on this happy VAT accounting and take care on the tax points - more about that later.