The VAT Guide Sections 31-35

Foreword

This notice cancels and replaces Notice 700 (March 2000). Details of any changes to the previous version can be found in paragraph 1.2 of this notice.

Further help and advice

If you need general advice or more copies of Customs and Excise notices, please ring the National Advice Service on 0845 010 9000. You can call between 8.00 am and 8.00 pm, Monday to Friday.

If you have hearing difficulties, please ring the Textphone service on 0845 000 0200.

If you would like to speak to someone in Welsh, please ring 0845 010 0300, between 8.00 am and 6.00 pm, Monday to Friday.

All calls are charged at the local rate within the UK. Charges may differ for mobile phones.

Other notices on this or related subjects

Notice 700 is the main reference guide to VAT. It includes frequent references to more specialised publications. See Section 1 of the notice for more information.

You can find helpful introductory information in:

• Notice 700/15 The Ins and Outs of VAT; and
• Notice 700/21 Keeping records and accounts.

31. VAT Act 1994, Schedule 5, Paragraphs 1 to 8

(This list of services is referred to in paragraphs 4.8.3 and 5.4)

32. Apportionment of output tax

32.1 Introduction to apportionment of output tax

This section gives examples of how to apportion output tax (see paragraph 8.1 of this notice).

There are two basic methods of apportioning output tax - one based on cost, the other on market value. There are examples here of both these methods, including an example of apportionment where you can only determine the cost of one of the supplies.

Both methods can be adapted to apply to either tax-inclusive or tax-exclusive amounts, as shown in the examples under Method 1(a).

You do not have to use any of the methods shown here but, if you do use a different method, it must still give a fair result.

Apportionment is only necessary if the price you charge is the only consideration for the supplies (see paragraph 7.3). If the consideration is not wholly in money you must account for VAT on the open market value of the supplies, as explained in paragraph 7.4.

32.2 Examples of methods for apportioning output tax

The examples assume that the standard rate of VAT is 17.5% and the VAT fraction is therefore 7/47.

32.2.1 Method 1(a) An apportionment based on the cost of both supplies

Example 1: VAT-inclusive price

You make a zero-rated supply and a standard-rated supply and you charge an inclusive price of £138. The cost (see paragraph 7.6) of the zero-rated supply is £23 and the tax-exclusive cost of the standard-rated supply is £40.

To work out the cost of the standard-rated supply including VAT:

(e) Add (c) and (d): £40 + £7 = £47

To work out the total cost, including VAT, of both supplies:

(f) Add (b) and (e): £23 + £47 = £70

To work out what proportion the standard-rated supply forms of the total cost:

(g) Divide (e) by (f):

To work out the amount of the total price formed by the standard-rated supply:

(h) Multiply (g) by (a): 0.6714 x £138 = £92.65

This is the VAT-inclusive price of the standard-rated supply.

To work out the VAT included in this amount:

(i) Multiply (h) by the VAT fraction:

To work out the tax value of the standard-rated supply:

(j) Subtract (i) from (h):

£92.65 - £13.80 = £78.85

To work out the tax value of the zero-rated supply:

(k) Subtract (h) from (a): £138 - £92.65 = £45.35

So the price of £138 is apportioned like this

Value of standard-rated supply = £78.85

VAT on standard-rated supply = £13.80

Value of zero-rated supply = £45.35

Total price (including VAT) = £138.00

Example 2: VAT- exclusive price

For the purpose of this example, the circumstances are identical to those described in example 1 except that you are calculating VAT on the basis of a tax-exclusive selling price of £126.

The VAT and tax values are therefore calculated as follows:

(a) Total price (excluding VAT) £126

(b) Cost of zero-rated supply £23

(c) Tax-exclusive cost of standard-rated supply £40

To work out the cost of both supplies:

(d) Add (b) and (c): £23 + £40 = £63

To work out what proportion the standard-rated supply forms of the total cost:

(e) Divide (c) by (d):

To work out the amount of the total price formed by the standard-rated supply:

(f) Multiply (e) by (a): 0.6349 x £126 = £80

This is the tax value of the standard-rated supply, excluding VAT.

To work out the VAT on the standard-rated supply:

(g) Multiply (f) by the standard rate of VAT: £80 x 17.5% = £14

To work out the tax value of the zero-rated supply:

(h) Subtract (f) from (a): £126 - £80 = £46

32.2.2 Method 1(b) An apportionment based on the cost of one supply only

You make a standard-rated supply and a zero-rated supply and you charge an inclusive price of £142. The zero-rated supply is of goods which cost you £26 - but the standard-rated supply is of services, the costs of which you cannot identify.

You can work out the VAT and the tax values like this:

(a) Total price (including VAT) £142

(b) Cost of zero-rated supply £26

To work out the value of the zero-rated supply:

(c) Add an uplift to (b): £26 + (say) 50% = £39

The actual cost-to-value uplift you apply will depend on the specific circumstances, but it must be a fair and reasonable figure, consistent with the profit margins actually achieved in your business.

To work out the amount of the total price formed by the standard-rated supply:

(d) Subtract (c) from (a): £142 - £39 = £103

To work out the VAT included in this amount:

(e) Multiply (d) by the VAT fraction:

To work out the value for VAT of the standard-rated supply:

(f) Subtract (e) from (d): £103 - £15.34 = £87.66

So the price of £142 is apportioned like this:

Value of standard-rated supply £87.66

VAT on standard-rated supply £15.34

Value of zero-rated supply £39.00

Total price (including VAT) £142.00

32.2.3 Method 2 An apportionment based on market values

You make a zero-rated supply and a standard-rated supply and charge an inclusive price of £200. Normally, your customer would have to pay £50 for the zero-rated supply and £200 (including VAT) for the standard-rated supply.

You can work out the tax values and the tax due like this:

(a) Total price (including VAT) £200

(b) Normal price for zero-rated supply £50

(c) Normal price (including VAT) for standard-rated supply £200

To work out the normal price for both supplies:

(d) Add (b) and (c): £50 + £200 = £250

To work out what proportion the standard-rated supply forms of the total normal price:

(e) Divide (c) by (d):

To work out the amount of the total price formed by the standard-rated supply:

(f) Multiply (a) by (e): £200 x 0.8 = £160

This is the VAT-inclusive price of the standard-rated supply.

To work out the VAT included in this amount:

(g) Multiply (f) by the VAT fraction:

To work out the tax value of the standard-rated supply:

(h) Subtract (g) from (f): £160 - £23.83 = £136.17

To work out the tax value of the zero-rated supply:

(i) Subtract (f) from (a): £200 - £l60 = £40

So the price of £200 is apportioned like this:

Value of standard-rated supply £136.17

VAT on standard-rated supply £23.83

Value of zero-rated supply £40.00

Total price (including VAT) £200.00

33. Apportionment of tax between business and non-business activities

33.1 Introduction to apportionment between activities

This section explains how to treat tax incurred on goods or services that are used only partly for business purposes (see paragraph 4.6.6).

There are special rules for private use of road fuel. These are set out in Notice 700/64 Motoring expenses.

33.2 Need for apportionment

You cannot treat VAT incurred on purchases of goods and services as input tax unless you intend to use those goods or services for the purposes of your business.

33.2.1 Services

If you buy services for both business and non-business (including private) purposes, you can treat only part of the VAT as input tax. You must work out what proportion of the use of the services is for business purposes. This is called apportionment. You can then make any further apportionment for partial exemption purposes.

33.2.2 Goods

If you buy goods for both business and private purposes, you may apportion the tax in the same way as you would for tax on services. However, if you choose, you may reclaim all the tax on the goods as input tax and then go on to account for output tax in each accounting period on the costs of making the goods available for private purposes.

33.3 Private use

If you buy goods or services for both business and private use, you must first decide on the percentage of business use. You can then work out the amount of VAT you can treat as input tax.

For example, if the VAT on the purchase is £100 and only one quarter is used for business purposes the input tax will be:

£100 x 1/4 = £25

33.4 Non-business activities

If you use goods or services partly for non-business activities - for example, if your organisation is a charity - you will not be able to treat all the VAT you pay as input tax.

You should begin by identifying, as far as you can, VAT on those purchases that are wholly attributable to either a business or a non-business use. Remember, VAT on purchases used wholly for non-business purposes is not input tax.

The VAT incurred on your remaining purchases, which you cannot attribute wholly to a business or non-business use, must then be apportioned. There is no special method of apportionment but your calculations must be fair and reasonable, and you must be able to justify them.

33.5 Example of a method of apportionment

This example shows how you can apportion VAT based on your income.

You should exclude from the calculation:

• the VAT on purchases which will be used wholly for either business or non-business purposes and deal with this as set out above; and
• purchases on which you can never reclaim input tax (see paragraph 10.3).

For the purposes of this example:

• you pay £l,000 VAT on purchases which are used for both business and non-business purposes;
• your income from business activities (taxable and exempt supplies) amounts to £20,000 per year; and
• your total income from all sources, including business activities, grants and donations, amounts to £50,000 per year.

You can work out your input tax like this:

(a) Total VAT paid £1,000

(b) Income from business activities £20,000

(c) Total income £50,000

To work out the proportion which is business income:

(d) Divide (b) by (c):

To work out how much of the VAT you have paid you can treat as input tax:

(e) Multiply (a) by (d):

This is your provisional input tax for the VAT period.

Remember, you do not have to use this method. If you consider that it is not suitable for your circumstances you can use any other formula, provided it produces a fair and reasonable result. See below.

33.6 Other methods of apportionment

These may include:

• keeping a record of the use made of an object (for example, a yacht or aircraft);
• keeping a record of the time spent by employees on business and non-business activities; and
• calculating within a building the extent to which the floor area is used for business and non-business purposes.

Whatever formula you use, the input tax is only reclaimed provisionally at the end of each tax period. At the end of each tax year you should make the adjustment as explained above.

When visiting you, VAT officers will check to ensure that the amount treated as input tax is fair and reasonable. If you have agreed a particular method with us but consider it is no longer suitable, you should write to your local VAT Business Centre giving details of your proposed new method.

33.7 Partial exemption

If you are partly exempt, you must work out how much VAT you can treat as input tax before you deal with any partial exemption calculations (see paragraph 13.1).

34. Standard legal abbreviations

A list of standard abbreviations for statutory references is set out below. The list also indicates those references which should begin in the upper case.

Full stops are used in law to indicate abbreviations. To help computer systems used by the trade, when you refer to the law you should normally leave out any full stops used to indicate abbreviations.

35. Index

This index covers information available in our publications.

There is a full list of VAT publications in Notice 999 Catalogue of publications and on our website. The address is www.hmce.gov.uk. You can obtain copies of notices from our National Advice Service.

Do you have any comments?

We would be pleased to receive any comments or suggestions you may have about this notice. Please write to:

HM Customs and Excise
Business Services and Taxes
Customer Focus Team
New King’s Beam House
22 Upper Ground
LONDON
SE1 9PJ

If you have a complaint or suggestion

If you have a complaint please try to resolve it on the spot with our officer. If you are unable to do so, or have a suggestion about how we can improve our service, you should contact one of our Regional Complaints Units. You will find the telephone number under ‘Customs and Excise - complaints and suggestions’ in your local telephone book. Ask for a copy of our code of practice ‘Complaints and putting things right’ (Notice 1000). You will find further information on our website at http://www.hmce.gov.uk.

If we are unable to resolve your complaint to your satisfaction you can ask the Adjudicator to look into it. The Adjudicator, whose services are free, is a fair and unbiased referee whose recommendations are independent of Customs and Excise.

You can contact the Adjudicator at:

The Adjudicator's Office
Haymarket House
28 Haymarket
LONDON
SW1Y 4SP

Phone: (020) 7930 2292
Fax: (020) 7930 2298
E-mail: adjudicators@gtnet.gov.uk
Internet: http://www.adjudicatorsoffice.gov.uk/

Update 2 issued February 2004

This leaflet amends certain paragraphs in Notice 700 April 2002 edition with new or revised information on a number of VAT questions including updates resulting from implementation of EC VAT Invoicing Directive.

It also updates the information given in Amendment 1 (May 2002) to the April 2002 edition regarding VAT on road tolls.

2 Administration of VAT

2.3 Tax avoidance

Delete first two sentences from “Tax avoidance is ------” up to “----------- tax simplification measures” and replace with “Tax avoidance is the use of contrived arrangements or structures to achieve a tax advantage - an increase in tax recovery, a reduction in the tax due or a tax deferral - contrary to the purpose and spirit of the legislation. Tax avoidance puts at risk Government revenues. It can also give a business an unfair advantage over others and threaten tax simplification measures.”

8 Output tax: particular situations

8.3 Delivery charges (postage and packing etc)

Paragraph 2, after the second boxed text. Delete “Your supply of delivery services is standard-rated if the goods are sent to an address in the UK and zero-rated if they are sent elsewhere" and replace with "If you supply delivery services see Notice 744B Freight transport and associated services."

8.9.3 Gifts on which VAT is not due

Delete paragraph 1 and the two bullet points following it from “VAT is not due on ----” up to “ a -------- your employees.” and replace with:

VAT is not due on:

• any business gifts made to the same person in any 12-month period, where the total cost does not exceed £50;
• a free meal to one of your employees.

9 Output tax: business and non-business use

9.2 Use of goods or services in your business

Paragraph 2. Delete first bullet point “are partly exempt (see paragraph 13.1) and ------------------- produced (see Notice 706/1 Self-supply of stationary);”

10 Input tax: introduction and general rules

Insert new Section 10.6A as follows:

10.6A Repayment of input tax if you do not pay your supplier

For supplies received on or after 1 January 2003 you are required to repay any input tax you have reclaimed if you have not paid your supplier within six months of:

(a) the date of supply (usually taken as the invoice date), or if later

(b) the due date for payment.

Notice 700/18 Relief from VAT on Bad Debts contains more detailed information on this.

12 Input tax: subsistence, staff entertainment and domestic accommodation expenses

After Chapter 12 and its sections, insert new Chapter 12A as follows:

12A Input tax: mobile phones provided to employees

12A. 1 VAT on the purchase and connection of a Mobile Phone

Where a business provides its employees with mobile phones for business use then, regardless of whether it allows private use, it can treat as input tax all the VAT it incurs on purchasing a phone and on standing charges for keeping it connected to the network providing the charges do not contain any element for calls.

12A.2 VAT on Mobile Phone Call Charges

12A.2.1 Business only

If a business does not allow its employees to make private calls, all of the VAT incurred on the call charges is input tax. Customs will accept this is the case where a business has imposed clear rules prohibiting private use and enforces them. However we realise that in practice businesses with such a policy often tolerate a small amount of private calls. We are prepared to treat such minimal use as being insignificant for VAT purposes and it will not prevent a business treating all the tax it incurs on calls as input tax.

12A.2.2 Charges for private calls

If a business charges its employees for any private calls they make, then it may treat the VAT incurred on the calls as input tax, but must account for output tax on the amounts it charges.

12A.2.3 Free private calls

If a business allows its employees to make private calls without charge, then it must apportion the VAT incurred on the call charges. It is not appropriate for businesses to adopt an alternative treatment of accounting for output tax on the private use.

12A.2.4 Apportioning calls

Businesses can choose any apportionment method that suits their individual circumstances providing the method chosen produces a fair and reasonable result. For example businesses could analyse a sample of bills taken over a reasonable period of time and use the same ratio for future VAT recovery on mobile phone bills.

12A.3 Fixed monthly charges

Where the phone package allows the business to make a certain quantity of calls for a fixed monthly payment and there is no separate standing charge, then it must apportion the VAT on the total charge for the package. Similarly, where the contract is for the purchase of the phone and the advance purchase of a set amount of call time for a single charge, the apportionment will also apply to the whole charge.

16 VAT invoices: general rules

Delete the whole Section 16.2.2 “Exceptions” and replace with:

16.2.2 Exceptions

You must issue a VAT invoice to a registered person unless:

• your customer operates self-billing arrangements (see Notice 700/62 Self-Billing) or you issue authenticated receipts (see paragraph 17.4); or
• you make a gift of goods on which VAT is due (see Notice 700/7 Business promotion schemes).

You must not issue VAT invoices for:

• any goods sold under one of the VAT second-hand schemes (see paragraph 8.5). You will find details of the special invoices you have to use in Notice 718 Margin Schemes for second-hand goods, works of art, antiques and collectors’ items; or supplies that fall within the tour operators’ margin scheme.

Insert new Section 16.2.4 as follows:

16.2.4 Must my invoice be written in English?

No. You may, if you wish, write your invoices in a language other than English. But you must be able to provide English translations of specific invoices within 30 days if asked to do so by a visiting officer. These rules apply to both electronic and paper invoices.

16.3.1 General

Paragraph 1. After “VAT invoices must show:” delete sixth bullet point.

Also delete seventh bullet point and replace with:

• a description which identifies the goods or services supplied; and
• the unit price (see paragraph 16.3.2).

Paragraph 2. Insert ‘the’ after “For each description, you must show:” (i.e. before the colon). Delete ‘the’ at the start of each bullet point.

Insert ‘and’ after fifth bullet point. Delete sixth bullet point.

Delete the whole Section 16.3.2 “Type of supply” and replace with:

16.3.2 Unit price

The requirement to include unit price on an invoice applies to countable goods or services. For services the countable element might be, for example,

• an hourly rate;
• or a price for standard services.

If the supply cannot be broken down into countable elements, then the total tax exclusive price will be the unit price. Additionally, the ‘unit price’ may not need to be shown at all if it

• is not normally provided in a particular business sector; and
• is not required by the customer.

Insert new Section 16.3.3 as follows:

16.3.3 Example of a VAT Invoice

You will find an example of a simplified VAT invoice at paragraph 16.7 and in Notice 700/21 Keeping records and accounts.

Delete the whole Section 16.4 “Invoicing in a foreign currency” and replace with:

16.4 Invoicing in a foreign currency

If you issue VAT invoices in a foreign currency for supplies of goods or services that take place in the UK, you must convert the total amount of VAT payable into sterling (see paragraphs 16.3.1 and 16.6.2). Paragraph 7.7 tells you how to do this.

16.6.1 Less detailed VAT invoice

Delete both instances of ‘£100’ in the boxed text (i.e. “is £100 or less” and “exceeds £100 and ------ invoice”) and replace with ‘£250’.

Second row on the “Then you ----” side of the table. Delete ‘shown in sterling’ at the end of fourth bullet point.

16.6.2 Modified VAT invoice

Paragraph 2, second bullet point. After ‘VAT payable on those supplies’ insert ‘shown in sterling;’

17 VAT invoices: particular situations and rules

VAT invoices for petrol and diesel oil (derv)

17.1 Delete both instances of ‘£100’ in boxed text (i.e. “£100 or less” and “more than £100”) and replace with ‘£250’.

17.4.1 Self-billing

Delete paragraph 2 including bullet points from “If you want a self -------------” up to “will not ------- transactions”. Replace with:

“If you want to use a self-billing system for supplies made to you, you must meet the conditions set out in Notice 700/62 Self-Billing.”

17.7 Computer invoicing

Delete paragraphs 3 “Before you do so -------” and 4 “Although you must -----“ and replace with:

“Before you do so, you will have to comply with certain conditions as set out in Notice 700/63 Electronic Invoicing.

If you do not use advanced electronic signature, or electronic data interchange (EDI) systems you may find it helpful to seek advice from our National Advice Service as soon as you decide to use computer invoicing.”

17.8.2 Transmission by e-mail

Delete the whole Section 17.8.2 “Transmission by email”

Insert new Section 17.9:

17.9 Using a third party to transmit invoices

You may, if you wish, ‘outsource’ the physical responsibility for the issuing of your sales invoices to a third party. But you must remember that all the legal obligations relating to the contents, storage and production of the invoices raised remain with you.

You can find out more about the conditions you will need to meet if you are using a third party to issue your invoices electronically at section 8 of Notice 700/63 Electronic Invoicing.

18 Credits and debts

18.2.2 Valid credit or debit notes

Insert new sentence at end of last paragraph as follows:

“If you issue invoices to persons in another Member State, credit or debit notes which amend those invoices must contain all the information required to be included on an invoice.”

18.2.4 Accounting for credit or debit notes you issue or receive

Paragraph 1. Delete “If you have to make an adjustment, you must adjust:” and replace with: “When you issue a credit note or receive a debit note, you must adjust:”

Paragraph 4. Delete last sentence “You must make it clear that it is a minus figure by writing it in brackets.” and replace with,

“You must make it clear that it is a minus figure by:

• writing it in brackets if you use a paper return; or
• inserting a minus sign ‘-’ before the figure if you use an electronic return. (See also paragraph 20.4.2)”

18.2.7 Self-billed debit notes

Delete the whole Section 18.2.7 “Self-billed debit notes.”

18.5 Can I claim relief from VAT on bad debts?

Paragraph 2. Bullet point 3. After “sent a notification to the purchaser” insert in brackets (this condition does not apply to supplies made on or after 1 January 2003).”

19 Records and accounts

Insert new Section 19.3A as follows:

19.3A Flat rate scheme

19.3A.1 What is the flat rate scheme?

The Flat Rate Scheme (FRS) offers small businesses an alternative to the normal transaction based method of VAT accounting. The aim is for small businesses to spend less time and money keeping VAT records and calculating the VAT payable to Customs.

When authorised to use the FRS you do not have to identify and record the VAT on your sales and purchases to calculate the VAT you owe to us. You record the VAT inclusive total of all your business supplies - including exempt supplies - and apply the flat rate percentage to it in each period. The result is the VAT you owe to us. Input tax is not normally claimed by businesses on the scheme, it is taken into account when the flat rates are calculated.

19.3A.2 Who can join the scheme?

The scheme is open to small businesses whose VAT exclusive annual taxable turnover does not exceed £150,000 and whose total VAT exclusive turnover (including the value of exempt and non-taxable income) does not exceed £187,500 a year.

19.3A.3 How is the flat rate calculated?

We calculate the flat rate percentage from the net tax paid by businesses. This is different for different trade sectors and so the flat rates vary. You can find further details about the flat rate scheme, including the table of flat rates and an application form, in Notice 733. There are special rates for businesses using FRS during their first year of VAT registration. They use a rate which is 1% below the usual rate because they generally claim back more VAT than businesses who have been registered longer for VAT.

19.3A.4 Advantages and disadvantages

Advantages:

• no need to separate out gross, VAT and net in your accounts;
• no more problems about what ‘input tax’ you can and cannot reclaim;
• you always know how much of your takings will need to be paid in VAT;
• less chance of mistakes, so fewer worries;
• less work doing the books so you can get on with running your business; and
• can be used in conjunction with the annual accounting scheme and has its own version of cash accounting and retail schemes.

Disadvantages:

• you cannot claim input tax, so the business loses some cash flow in VAT on stock waiting to be sold;
• the lesser detail of VAT records kept while using the scheme may make it more difficult to monitor whether the scheme is still a help to the business; and
• the scheme cannot be used in conjunction with the tour operator’s margin scheme or the margin schemes for second-hand goods, works of art, antiques and collectors’ items.

You can find further details about the flat rate scheme including the table of flat rates and an application form in Notice 733.

19.5.1 General

Paragraph 3. Section (d), bullet point 1. After “goods you import by post – other ------------- of £2000 or less” insert in brackets “(see also paragraph 19.8.1 (b))” before ‘;and’.

19.6 Record of credits allowed to customers

Delete last two paragraphs after boxed text including the bullet points from, ‘When you make a tax…’ onwards. Replace with, “See also paragraph 18.2.4 for information on how to account for credit or debit notes you issue or receive.”

19.7.5 Other circumstances

Update to Amendment 1 (May 2003) of Notice 700. Under “This excludes tolls charged by the:” Insert “Clifton Suspension Bridge" after “Cleddau Bridge”.

19.8.1 General

Paragraph 3. Section (b), bullet point 1. After “goods imported by post - other ------------- of £2000 or less” insert in brackets “(see also paragraph 19.5.1 (d))” before ‘; or’.

19.14 Example of a VAT account

Example of a VAT account. Title of the example. Delete “1 January 2001 to 30 March 2001” and replace with “1 January 2003 to 31 March 2003”.

On the VAT payable – Output tax side of the table. Lines 9 and 10. Delete “Annual adjustment: Retail Scheme D” and replace with “Annual adjustment: Retail Scheme - Apportionment Scheme 1”.

20 VAT returns and payment of tax: introduction and completion of returns

Delete the whole Section 20.6 “Annual accounting scheme” and replace with:

20.6 Annual accounting scheme

20.6.1 Eligibility

This scheme allows eligible businesses to submit one VAT return a year instead of the usual four. You will have to make interim payments by electronic means based on your actual or estimated annual VAT liability.

The scheme is open to small businesses who:

• have been VAT registered for less than 1 year and don’t expect the VAT exclusive turnover in the next year to be more than £150,000; or
• have been VAT registered for more than one year and don’t expect the VAT exclusive turnover in the next year to be more than £600,000.

20.6.2 Interim payments

If you have been registered for 12 months or more you will make 9 interim payments of 10% of your previous year’s VAT liability.

If you have been registered for less than 12 months you will make 9 interim payments of 10% of your expected VAT liability.

Payments start at the end of month 4 of your annual accounting year and the ninth payment is paid at the end of month 12. You then have 2 months to send in your return and balancing payment. We then calculate payments for the next year, which will start again at the end of month 4.

20.6.3 Advantages of the scheme

The advantages of the scheme are:

• an eligible business can choose an annual accounting year that best suits its business needs;
• your annual VAT return and balancing payment will be due 2 months after the end of the annual accounting period;
• you will be able to manage your cash flow with more certainty by paying a set amount each month;
• we will notify you how and when to make your payments;
• you can choose which electronic method to make your interim payments by - BACS, CHAPS, bank giro, direct debit or standing order.

20.6.4 Points to consider

You will also need to consider the following:

• repayment traders will not have to make interim payments but will not get a repayment until the annual return is sent in;
• you must continue to keep your business records on a regular basis, do not try and write them all up at the end of the year.

Further details about the scheme, including the application form for joining, are in Notice 732.

26 Changes in circumstances

26.1 Introduction to changes in circumstances

Delete paragraph 4 “If you wish --------- listed in paragraphs 26.2 and 26.3.”

26.3 What changes require amendment of registration?

Paragraph 2, after the second bullet point “giving the date -------- took place. Insert a new paragraph as follows “You may render yourself liable to civil penalty if you fail to notify any of the above changes within the prescribed time limit. See Notice 700/1 Should I be registered for VAT? for further details.

26.14 Example of Form VAT 902

Delete the whole Section 26.14 “Example of Form VAT 902”.

35 Index

Index F

Insert “Flat rate scheme” after ”Fishing rights”. Same subject, on the ‘References in this notice’ side of the table, insert 19.3A. Same subject, on the ‘References in other publications’ side of the table, insert 733.

Index H

Subject: ‘Handicapped people’. Delete “ - see Disabled”. Same subject, on the ‘References in other publications’ side of the table, insert ‘371, 701/6, 701/7, and 744A’.

Index I

Index I. Subject: ‘Input tax’. Insert “- mobile phones provided to employees” after “- goods dwellings and residential buildings”. Same subject, on the ‘References in this notice’ side of the table, insert ‘12A’.

Index M

Insert “Mobile phones provided to employees” after “Mobile homes – see Caravans”. Same subject, on the ‘References in this notice’ side of the table, insert ‘12A’.

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