HMRC freezes VAT at 15% for retailers and phone companies

The taxman has given pubs, clubs, restaurants, hotels and mobile phone operators an extension allowing them to charge the 15% VAT rate until 6am on New Year's Day.

HMRevenue& Customs has extended the olive branch to spare the many businesses catering for customers at the stroke of midnight on 31 December a large and costly burden, when the rate of VAT reverts to 17.5%.

HMRC said: "In order to assist businesses in this position HMRC will allow them to account for VAT at 15 per cent on takings received up to the earlier of:

-the end of trading of the 31 December session or

-6am on the morning of 1 January 2010."

However the taxman has been careful to limit the extension.

It is restricted to those businesses open at midnight on 31 December 2009 that account for VAT at the point of sale such as businesses on a retail scheme - pubs, shops, restaurants etc, HMRC emphasised.

It will not apply to mail order or on-line retailers or businesses that account for VAT on the basis of VAT invoices issued, or pre-payments for supplies of goods or services to be provided after 6am on 1 January 2010.

Amanda Tickel, Telecom Partner at KPMG believed the mobile sector would be particularly relieved HMRC has responded to retailers’ calls to avoid complex billing system changes during one of their "most frantic trading points of the year."

"The volume of New Years Eve texts and calls make it one of the most intense times for mobile traffic," Tickel said. Having to charge one VAT rate for calls made at midnight and a different rate for those at one second past 12 for this scale of network traffic would be a large and costly burden.

"In responding to their calls to delay this change even for a few hours, HMRC have recognised the considerable effort required by all retailers to implement a VAT rate change, because it impacts on point of sale material, pricing and EPOS systems."

Read HMRC's terms and conditions for the extension