Warning of VAT disruption
Only a third of businesses have so far prepared for the return of VAT to 17.5 per cent, which takes place on January 1st.
Business software supplier Sage says that businesses need to start their preparations now, or face disruption in the New Year.
“This is cause for serious concern – managing the change for something as integral as VAT is not as easy as simply flicking a switch. In fact, it can be hugely complex for businesses both small and large,” comments Kevin Hart, head of government relationships at Sage UK & Ireland. “Businesses need support and guidance throughout the whole transition process to help them understand how and when they need to make the necessary changes. Those that fail to plan the changes now will pay the price later.”
When the last VAT change was announced, businesses were given only four days to prepare critical business processes such as invoicing, credit notes and refunds for the change.
While the Government has given businesses more time to prepare for the upcoming change, the VAT will return to 17.5 per cent on January 1st – when the vast majority of UK businesses, as well as their advisers and support operations, will be closed for their Christmas holiday and unable to make the necessary changes. Many of the businesses that will be open – especially retailers and the hospitality trade – will be experiencing their busiest trading period of the year.
The VAT change will create a number of business complications that require consideration and planning as the VAT rates applied will be dependent on a multitude of different sales and invoicing scenarios. There are also special arrangements for certain businesses operating beyond midnight on 31st December as well as special rules for sales that span the change in rate. Further complications arise for many businesses who have to deal with split invoices and part and/or pre payments as well as additional complications with regards to credit notes, refund handling and VAT returns. Those that deal with sales into Europe will also have to apply VAT reporting changes as of the start of January.
Sage has provided the following guidelines to help businesses prepare for the VAT change:
1. Plan early for the change – don’t leave it until after Christmas.
2. Consult with your accountant early on to understand how the VAT change will impact the way you handle transactions – they may be busy with clients’ self-assessment returns towards the end of the year.
3. Business software will help manage the complexities of split invoices, part and/or pre payments, credit notes and refund handling – but make sure it is up to date and ready for the VAT rate change.
4. Explore whether there are any special dispensations for your business to help you manage the change.
5. Consider how the VAT change could impact your sales cycle – by planning ahead, the VAT change could be advantageous to your business.
Related Articles:
Loading ...
