New VAT rate hits as IPT standard rate rises to 6%
Insurance companies have been advised to stagger the costs of services provided to them to help ease the full brunt of this week’s VAT hike.
While insurance companies cannot charge VAT, which went up from 17.5% to 20% on Tuesday, they have to pay it on the goods and services they purchase.
Indirect tax partner at accountant Littlejohn, Robert Jones, said that in order to avoid unnecessarily high payments, companies should distinguish between services bought under long-term contracts before and after the introduction of the VAT increase.
But he said it was too late for companies to make pre-payment arrangements to keep the rate of VAT down to 17.5% for capital goods.
This week also saw the introduction of increases in insurance premium tax, the standard rate of which went up from 5% to 6%.