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Important notice re VAT changes

Her Majesty's Revenue and Customs is changing the rules for how VAT is calculated for businesses offering prompt payment discounts, with the new regime beginning in April 2015. At present, VAT is charged on the discounted amount regardless of whether the customer makes a prompt payment, but as of next spring the tax charge will be made on the actual amount paid.  A discount is offered through the MRO agreement if the invoice is paid within 90 days. 

This change will take effect from 1 April 2015 but has to be accounted for from 1 January 2015 on any Requests For Payment because the tax point (which is the date of payment) will fall on or after 1 April 2015 (i.e. after the UK VAT law changes). 

This means from 1 January 2015, the info on the RFPs will change as we need to show that 20% VAT is due on the Rate B charges (i.e. the higher charges due if payment is made more than 90 days later) rather than requesting 20% VAT based on just the Rate A charges in relation to both the Rate A and Rate B charges.   

  • no difference to customers paying the discounted rate. 

  • if they pay the full rate, they will be paying £5 additional VAT. 

Please see below an example of the MRO rates based on a General Practitioner (no notes).

Before the changes:

  Rate A (With Discount)  Rate B (No Discount) 
Net: £200 £225
VAT: £40 £40
TOTAL: £240 £265

Following the changes: 

  Rate A (With Discount)  Rate B (No Discount) 
Net: £200 £225
VAT: £40 £45
TOTAL: £240 £270

If you have any questions about the changes, please contact at the following address.