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Newsletter issue - September 2010.
VAT can be very complicated at times! Most goods and services carry VAT at the standard rate, which is currently 17.5% and is due to increase to 20% on 4 January 2011. However, some transactions, such as financial services, are exempt from VAT, and some goods, such as children's clothes, carry VAT at 0%.
To confuse matters even more, certain services can carry VAT at 5%, or 17.5% or 0%, depending on the circumstances. For example, renovating a house that has been empty for at least two years can carry VAT at 5%, but repairing a roof on another building will generally require VAT to be charged at 17.5%, unless the building has 'listed' status, when the work may be zero rated if it is an approved alteration.
If you find you have charged VAT at too high a rate to your customer you should refund the excess VAT charged, if this is practical and possible. You also need to correct your VAT returns for the excess VAT paid over to the VAT office. You can only make a claim for overpaid VAT for VAT periods ending in the last four years, so don't delay if you find an error that covers several periods.
