Pre-Budget Report 2008 - VAT Rate Changes

posted on 25 November 2008, updated on 25 November 2008

In his Pre-Budget Report on 24 November 2008 the Chancellor announced that the standard rate of VAT will be reduced to 15% on 1 December 2008.

This means that for any sales of standard-rated goods or services that take place on or after 1 December 2008 providers should charge VAT at the new rate of 15%.

Only standard-rated sales are affected. 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 31 December 2009, and from 1 January 2010 it will revert to 17.5%.

The government proposes to introduce anti-forestalling legislation in Finance Bill 2009 to ensure that providers are not able to use artificial arrangements to reduce the VAT rate on goods or services to be provided after the rate reverts to 17.5% where there is no current economic activity.

Related links:

• HMRC - Changes to the Standard Rate of VAT