As you know the VAT rate has been reduced from 17.5% to 15%. The Change of Rate Order is valid from 1st December 2008 to 31st December 2009. The Chancellor announced this decision in the Pre-Budget Report on 24th November 2008 to cut the prices of any sales and services in an attempt to push the economy.
The proposal of cutting Value Added Tax comes from the European Commission to help the worldwide financial situation and promote the Internal Market (production and use of energy-saving materials and energy-efficient appliances and equipment) and UK government accepted a challenge that should positively impact all of us.
Services relating to many sectors (including housing construction, renovation, repair, maintenance, cultural heritage and historical monuments) will see their rates reduced. Only standard-rated sales are affected, so there are no changes to sales that are zero-rated or reduced-rated for VAT, similarly, there are no changes to the VAT exemptions. The 15% rate will remain until 31st December 2009, and from 1st January 2010 it will revert to 17.5%. Genuine commercial transactions should not be affected. All the details are in the written statement to be made by the Financial Secretary to the Treasury on 25th November 2008.
So enjoy the reduction and think positively and don’t forget to update the prices of your products and services.