Major changes to VAT

In 2010 three major changes to VAT will be introduced.

1. VAT rate

On 1 January 2010 the standard rate of VAT reverts to 17.5 per cent.

2. VAT registered businesses

The VAT rules for businesses who:

  • supply services to or receive services from overseas businesses
  • supply goods to other EC countries
  • reclaim VAT incurred in another EC country

also change and where, how and when VAT is accounted for, completion of EC Sales Lists and reclaiming VAT incurred in another EC country are all affected.

You must consider now whether the changes affect you and what you need to do to prepare for them.

3. VAT filing and payment arrangements

Under Government proposals, from 1 April 2010 the way some businesses file their VAT returns and pay any VAT due will also change:

  • all VAT registered businesses with a turnover of £100,000 or more (excluding VAT)
  • all businesses newly registering for VAT, whatever their turnover

must file their VAT returns online and pay any VAT due electronically.

If your business falls into either of the above categories, the changes apply to all returns covering accounting periods beginning on or after 1 April 2010 and we will no longer issue paper returns for these periods.

Filing returns on paper will still be an option for the remaining VAT registered businesses, but this will be reviewed in the run up to 2012.

How to file online

VAT registered businesses can file online using either HMRC’s software or a commercial product (which may interact with your internal systems, extend to cover bookkeeping and offer other helpful facilities). A list of the commercial software products available can be found on our website - Select the section headed ‘Online Services – options available’ and then select the 'XML VAT return' link in the 'Software provided by commercial suppliers' column.

Benefits of using the VAT Online service

A major benefit of paying electronically is the additional time for most businesses to pay any VAT due and to file their VAT return.


We plan to raise customer awareness of these changes in a variety of ways - including messages on the VAT returns and envelopes, articles in VAT Notes, and a mailing in late 2009 to all VAT registered customers. There will be a series of nationwide events providing businesses with practical advice on the VAT Online service and how to enrol. We will also be taking advantage of other Departmental mailings to get the message over to customers.