Pubs, clubs and restaurants to get VAT extension on New Year's Eve

Making the announcement, financial secretary to the Treasury, Stephen Timms MP, said: "New Year's Eve celebrations are a vital source of income for many in the service sector. The Government recognises that it would be very difficult for them to make the necessary changes to account for VAT at 17.5% immediately after midnight. "To make the transition as easy as possible retail and telecommunication businesses will be able to charge VAT at the old rate into the early hours of New Years Day. "I announced in May 2009 that HMRC would be allowing a 'period of grace' to help businesses trading across midnight on 31 December in implementing the VAT rate change, and that they would work with business on the details. I am very pleased that HMRC is now able to confirm these arrangements and I hope that those businesses affected will find them helpful." The 'period of grace' is restricted to those businesses that account for VAT at the point of sale such as businesses on a retail scheme – pubs, shops, restaurants etc and to the cost of calls or texts made and billed in the early hours of January 1st 2010. It will not apply to businesses that account for VAT on the basis of VAT invoices issued or to mail order or on-line retail sales.