We comment on a few of the areas to think about below. For more detailed advice please contact us or look at the HMRC guide linked to in the first paragraph.

Be aware of the rules surrounding advance deposits/pre-payments received before 1 January 2010 for goods or services made after this date. Getting this wrong could be costly! We recommend that you refer to the HMRC guidance for additional information in regards to the VAT change.

Display new prices

In certain instances, it may also be appropriate to give customers practical examples of what the prices will look like from January 2010. Businesses that interact directly with the public, such as retailers, should display announcements in their shops and create bespoke banners for their websites. Also, be aware of the special circumstances under the Price Marking Order 2004, which grants businesses up to 14 days to adjust ticket prices; there is talk of this being extended.

Admin

Adapting to the new rate can be a very cumbersome task for some business owners. There can also be additional confusion where transactions span the VAT change date. Regardless of whether a business uses standard or cash accounting, it is the tax point that determines the rate of standard VAT to be applied. For cash accounting, this means that 15% VAT will be due on supplies and purchases made before 1st January 2010, even if payment was received or made after 1st January 2010.

Split your invoices

If you start a job before 1 January 2010 but finish afterwards, you may account for the work done up to 31 December at 15%, and the remainder at 17.5%.

Ignorance isn’t bliss

Don’t leave it too late and find yourself in a mad rush to make the change in January. Plan now. This is a mandatory change and everyone is in the same boat.

QuickBooks guidance on VAT rate change is here

Sage website advice is here