This extra eNews bulletin sets out to draw attention to practical issues which will be encountered by businesses following the change in VAT rate on 1 December 2008 including changes necessary to accounting software. As every business is different it should only be taken as a guide and professional advice should be sought if in any doubt. Click here for our full Pre-Budget Report summary.

HMRC guidance

HMRC has issued a 44 page detailed guide which can be downloaded from here.

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Certain trades

These businesses have specific advice included in the HMRC guide:

• Tour operators
• Barristers
• Solicitors
• Clubs and associations
• Construction services and property
• Second hand traders using the Margin scheme
• Continuous services

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VAT fraction

This will be 3/23rds from 1 December rather than 7/47ths.

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Flat rate scheme

The flat rate scheme rates will change from 1 December and the new rates are included in the HMRC guide as an appendix.

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Fuel scale charges

These will change from 1 December and the new charges are included in the HMRC guide as an appendix.

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Cash accounting

Businesses will have to identify those payments received after 30th November which relate to sales at 17.5%.

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Reducing sales prices

To calculate the new selling price to reflect the change in VAT rate, multiply the existing price by 46/47 – it is a reduction of about 2.1% not 2.5%.

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Annual accounting system

Instalments already notified will not be changed.

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Accounting software

Sage

Sage has issued guidance which can be found here.

We have also put some practical advice on our website here which we suggest you should consider carefully before making any changes.

QuickBooks

Guidance from QuickBooks on their Forum is as follows:

“HMRC have advised via BASDA (Business Applications Software Developers Association) that the recommended course of action is to create another VAT code and apply this for the relevant VAT transactions; then revert to the current code from 01/01/2010, unless the regulations change between now & then. Please refer to HMRC for further guidance.

We are in the process of putting together processes that will accommodate these changes. As soon as these have been finalised and tested the FAQ’s will be posted accordingly. We will keep you informed on this.

Thank you. We look forward to getting this information to you as quickly as possible”.

Further guidance should be found here when it has been issued.

A forum topic thread is here.

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Disclaimer
This newsletter is published for the information of clients and other recipients of our email newsletters. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this newsletter can be accepted by the firm.