The above brief has been published which reminds businesses of two VAT changes that took place this month. These are the increase in the standard rate of VAT from 17.5 per cent to 20 per cent from 4 January 2011 and changes to the place of supply rules for cultural, artistic, sporting, scientific, educational, entertainment or similar activities supplied to relevant business customers from 1 January 2011.

The rate change only applies to the standard VAT rate-there are no changes to sales that are zero-rated or reduced-rated for VAT. Similarly, there are no changes to the VAT exemptions. Any sales made at these rates are unaffected by this change.

Payments on Account Regime

However, the VAT rate increase means that there will be consequential changes to the VAT Payment on Account (POA) thresholds. Under the POA rules, certain businesses are required to make monthly VAT payments. Since the VAT rate change will increase the VAT liabilities of businesses, the POA entry and exit thresholds will go up from £1.6m and £2m to £1.8m and £2.3m.

The thresholds will change on 1 June 2011 for quarterly reviews and on 1 December 2011 for annual reviews.

From 1 January 2011, as part of the changes to the cross border VAT rules (agreed at EU level in 2009), most business to business (B2B) supplies of cultural, artistic, sporting, scientific, educational, entertainment and similar services will be taxed where the customer is established, under the B2B general place of supply rule.

However, supplies of admission to cultural, artistic, sporting, scientific, educational and entertainment events, and services ancillary to admissions (such as cloakrooms) will remain taxable where the event takes place. Business to consumer supplies (B2C) will be unaffected.

Admission will cover any payment that gives the right to attend an event even if it is covered by a season ticket or subscription. This includes payment to attend conferences, exhibitions and seminars even if they are of an educational nature. In-house events will fall within this rule as well as those open to the general public.

For the full text of the Business Brief go to http://www.hmrc.gov.uk/briefs/vat/brief5210.htm