Introduction
The standard rate of VAT is reduced to 15% from 1 December 2008. All other rates remain the same.

Invoiced Income
The standard rate of VAT on the vast majority of invoices raised on or after 1 December 2008 for standard rated goods and services sold will be 15%.

The only exceptions which will still use the previous rate of 17.5% are:

	Where the goods or services being invoiced were delivered before 1 October 2008 or
	Where payment was received before 1 December 2008 for goods or services received before 1 December 2008, but where an invoice has yet to be issued.

Credit notes should always use the same VAT rate as the invoice to which they relate.

Accounts Payable
Invoices raised by suppliers dated on or after 1 December for standard rated goods or services received after 18 November 2008 will generally charge VAT at 15%. The percentage used by the supplier should be.

Invoices from suppliers dated on or after 1 December 2008 may still legitimately charge VAT at 17.5% if:

	the goods or services were delivered before 18 November 2008 or
	Norfolk County Council made a payment in advance of invoice prior to 1 December 2008.

We are recommending that schools pay the VAT that is invoiced during December and apply the rules above for invoices received in January (therefore from January suppliers should be questioned (and a credit note requested if there is no suitable explanation).

There are special rules for payments in advance for continuous services spanning the date of change, and for the supply of construction services.

Cash and Till Receipts
Any standard rated retail / cash / till income (admissions, shop sales etc) received on or after 1 December 2008 should be treated as including 15% VAT. The new "VAT fraction" is 3/23.

Where prices of standard rated goods and services have been set without reference to VAT, the Council can choose whether or not to reduce the price. There will be a modest increase in net income to the Council on standard rated supplies unless the price is reduced.

Petty Cash Expenditure and Expenses
VAT should be reclaimed as shown on invoices. Where there is any doubt, 15% should be used for invoices or expenses dated on or after 1 December 2008, using the new VAT fraction 3/23.

Systems

Star Accounts:
A new category of 'F' at 15% VAT has been set up and should be used for future purchase orders and the payment of all invoices charged at the new rate. Existing orders that are invoiced at the new 15% rate will need to be edited to the new VAT rate.

Cash Accounts:
You have been notified to set up a new 15% VAT rate as option '5' in MI197/08. All future orders should be processed using this new VAT category until further notice. It is conceivable that some invoices over the next few months may be charged at either VAT rate and should be adjusted within the system when the invoice is paid. Section 12, page 10 of the user guide gives advice on how this should be done.

LM Accounts:
As this system will no longer be used after 5 December no upgrade will be made available. All invoices which are charged at the new 15% VAT rate will need to be entered into STAR Accounts.

Lettings/Invoices system (Excel only):
An upgrade fix will be emailed to the 'office' email account of all High school with instructions on what action should be taken.

If you require any further advice regarding the above please contact your Finance Support Officer.