The government’s plan to increase the VAT rate back to its original 17.5% is likely to play out as planned.

For contractors in the UK, this means they (or their Limited Companies), will have to revert back to charging their clients 17.5% VAT instead of the current discounted rate of 15%. For contractors in the UK taking advantage for the Flat Rate VAT scheme, this will be a welcome change.

Many companies, particularly those on the high street, are unhappy with this proposal as the increase is due to take place from midnight on 31 December 2009. This is traditionally a very busy time for many retailers with the Christmas shopping and bumper sales season at its peak. Making the change at such a critical time for retailers is an enormous exercise.  

The British Retail Consortium (BRC) is putting pressure on the government to push this date back to the end of January 2010.

Read more about the changes on HMRC’s website at http://www.hmrc.gov.uk/pbr2008/measure1.htm

1st Contact Accounting offers Specialist tax services to contracting professionals these services include: Contractor Accounting, Personal Tax for Contractors, Limited Companies for Contractors and Contractor Financial Advice.