VAT given New Year's Day extension

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VAT given New Year's Day extension

The reduced 15 per cent VAT rate will continue for businesses open after midnight on New Year's Eve, HM Revenue and Customs has confirmed.

Bars, clubs and restaurants will carry on with the reduced charge until closing or 06:00 GMT on January 1st. The charges were due to return to their former rate of 17.5 per cent at midnight.

The cut in VAT has resulted in a drop of £6.4 billion in revenue for the government in 2008-09, the National Audit Office reported.

Stephen Timms, financial secretary to the Treasury, said the celebrations are vital to many service sector businesses. The decision to continue the reduced rate was made "to make the transition as easy as possible for retail and telecommunication businesses".

Charges for calls and texts made before 06:00 GMT on January 1st will also retain the 15 per cent VAT rate.

Only companies that add the VAT at the point of sale, mainly in the retail sector, are eligible for the extended period. However, online retail and mail-order services will not be included.

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