Don’t get caught out by VAT hike sharp practiceRetailers overcharge by increasing VAT too early

31 December 2010

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The Which? Money helpline has been hearing about some sharp practices amongst traders regarding the increase in VAT, with some consumers being overcharged.

From 4 January 2011 the standard rate of VAT goes up from 17.5% to 20%. A number of Which? members have contacted us about goods they ordered before the VAT rise that won’t be delivered until after 4 January - and their suppliers are wrongly saying that they'll have to pay the new rate, even if a deposit was given before the rate change.

How to beat the VAT increase

So is there anything you can do to avoid paying the higher rate if your goods won’t be delivered until after the increase? The answer is yes.

Your retailer can give a VAT invoice for the full cost of the goods or service. As long as this is dated prior to 4 January 2011, and must be settled within six months of issue, the current rate of VAT should apply.

Retailers and service providers should know this, as this information is contained in HMRC’s guidance on the VAT increase.

Ask for a VAT invoice now

So, if you've made a big purchase, such as a car or a fitted kitchen that you will have to pay for in full within six months of ordering, you can ask for a VAT invoice for the full amount with a current date. In most cases, you won’t have to pay the extra VAT on your purchase.

If businesses are issuing you with a current VAT invoice but charging you 20%, this is likely to be incorrect and you should contact HMRC.

If you want further clarification, contact HMRC’s VAT helpline on 0845 010 9000 (8am to 8pm, Monday to Friday).

More information on beating the VAT increase

For more information, read our news story on beating the VAT increase.

If you intend to use a credit card to buy big ticket items this season, consider using one with a 0%-on-purchases deal, or a cashback or rewards credit card. 

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