VAT rate change

What is the correct rate of VAT for gas consumed in (December) 2009, but now newly invoiced in 2010?

The correct rate for this gas is 17.5%, as the VAT tax point for gas is the date of the invoice.  This follows the guidelines as set out by the HMRC's VAT guide - opens in new window.  The extract from this guide which is relevant to this question is:

14.3 Continuous supplies of goods and services

If you supply services on a continuous basis and receive payments regularly or from time to time, there is a tax point every time you:

• issue a VAT invoice; or
• receive a payment, whichever happens first

I have received invoices from other suppliers, including my electricity supplier, dated January 2010, where VAT has been charged at 15%.  Why has Shell Gas Direct invoiced at a rate of 17.5% VAT rate?

The VAT rate for most goods is based on a tax point date related to the time of supply, but with continuous supplies, such as gas and electricity, there is an exception and therefore different rules apply.  Please see the Q & A above for more detail.  If your electricity supplier has sent you a 2010 invoice with 15% VAT, the reason may be that a cash receipt date before 1st January was used as a tax point, whereby payments are made in advance, or under a budget type payment scheme.

By paying 17.5% VAT, my business cash flow is suffering because I am unable to reclaim the additional cost from HMRC until the end of the quarter. This seems unfair.

During the period where the VAT rate was reduced to 15%, this had a positive effect upon our customers, allowing them to benefit from the decreased rate.  If you were not a Shell Gas Direct customer during this time, you will have received the same benefit from your previous supplier.

If you require any further information on the increased VAT rate, and you wish to talk to a member of our Customer Services team, please contact us directly.