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Tuesday, 24 November 2009

The last thing you will probably be worrying about this New Year’s Eve...

The last thing you will probably be worrying about this New Year’s Eve is VAT. You are more likely to be thinking about where to grab your first kiss of 2010 or quickly thinking up a few resolutions that will inevitably be broken a few days later.

But if you are staying in a hotel that evening, your host may be worrying about just that. The temporary 2.5% reduction in VAT to 15% that was introduced in response to the wobbling economy will be reversed at midnight on 31 December 2009.

So what happens in the hotel bar around midnight? Do hotels have to reprogram your tills just as Big Ben’s bongs sound out to add 2.5% to the cost of a bottle of bubbles.

Luckily, the HM Revenue and Customs has said it will be flexible and let hotels (and other businesses such as bars) charge 15% until 6am. It will also turn a blind eye to any minor mistakes made in accounting for VAT over the New Year.

Whether HMRC will be as lenient with businesses who make mistakes as a result of the entry into force of new European VAT rules on the same date – when B2B supplies of services will begin to be taxed at the place where the customer is established and no longer at the place where the supplier is established – remains to be seen.

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