VAT on December quarter rent.

The standard rate of VAT increases to 20% on 4 January 2011. The tax point arises on the date of issue of the VAT invoice or the date of receipt of payment, whichever is first. For quarterly rent payments due on 25 December, if you receive the payment or issue the VAT invoice on or before 3 January, VAT should be charged at 17.5%.

If you receive payment or issue the VAT invoice on or after 4 January, you can either:

a) charge VAT at a rate of 20% on the whole quarter's rent; or
 

b) elect to charge 17.5% on the rent for the period 25 December 2010 to 3 January 2010 and 20% on the remainder.

If you only issue the VAT invoice upon receipt of payment, we suggest that to avoid any risk of undercharging VAT you send a note to your tenants explaining the above.