VAT Update

Reduction of the standard rate of VAT

In his Pre-Budget Report of 24 November 2008 the Chancellor announced that the standard rate of VAT will be reduced to 15%.

New standard rate from 1 December 2008

The new standard rate of VAT, 15%, comes into effect on 1 December 2008.

Effect on businesses – what you need to do
This change affects any VAT registered business that sells or purchases goods or services that are subject to the standard rate of VAT. You should charge standard rate VAT at the new rate of 15% for any sales of standard rated goods or services that take place on or after 1 December 2008.

My prices are VAT inclusive. How do I calculate the new rate?
If you’ve charged a VAT inclusive price, you should use the VAT fraction to work out the VAT element. The VAT fraction for the 15% rate is 3/23.

Will I need to change my till?
Many retailers have till systems which calculate VAT at the point of sale. If you use an electronic system to record retail sales you will need to make sure it is adjusted to take account of the new rate with effect from 1 December 2008. You may need to consult the manufacturer or supplier of your particular system to find out how to make the necessary adjustments.

Do I need to change my Sage accounts program ?
Yes. From 1st December 2008 you will need to alter your sage program. Different Sage programs and versions have different ways of altering these codes, but generally Settings, configuration, Tax Codes Will get you to the area to change the rate from 17.5% to 15%

How much do I need to reduce my prices by to take account of the reduction in VAT?
To reduce your VAT inclusive prices to reflect the reduction in the VAT rate to 15% you should multiply your old prices by 115/117.5, which is equal to 46/47.

Do I have to pass on the VAT reduction to my customers by reducing my prices?
The Government is making this change as part of a broader package of fiscal measures to give the economy a boost. Passing on the tax reduction through reduced prices will stimulate consumer spending and mean that both businesses and consumers benefit from this change. However, ultimately decisions on prices charged by your business and paid by your customers is down to you not the government.

Do I have to alter my stationery and invoices?
Yes. If your invoices show “Vat at 17.5%” this needs to be altered to “VAT @ 15%”

What about refunds?
If you give a refund on or after 1 December 2008 for a sale you made before 1 December, you will have to adjust your daily gross takings to take account of the VAT originally charged at 17.5% by using the VAT fraction of 7/47.

How do I complete a VAT return if it covers both the old rate of 17.5% and the new rate of 15% ?
You will have to make two separate calculations for periods up to 30th November 2007 and also from 1st December 2008 and then add them together to complete one VAT return.

If I am on a cash accounting scheme how do I claim vat back after 1st December 2008 ?
If you claim vat back on purchases on a cash accounting scheme e.g. when you pay for the items you will have to identify every payment after 1st December 2008 and work out if the payment relates to invoices at 17.5% or 15%

Will the rate change affect my flat rate percentage if I am on a flat rate scheme?
Yes. The table of flat rates has been changed to reflect the new rate of VAT. Please contact us for your new business sector flat rate charge.

What happens if I have already have quoted for jobs at 17.5% ?
You do not under normal circumstances have to reissue quotes. All you have to do is charge vat at the lower rate of 15% when you issue the invoice.

Any further questions……
Ring us on 01423 561732



		NEW Budget Information R Stride & Co VAT Update Reduction of the standard rate of VAT In his Pre-Budget Report of 24 November 2008 the Chancellor announced that the standard rate of VAT will be reduced to 15%. New standard rate from 1 December 2008 The new standard rate of VAT, 15%, comes into effect on 1 December 2008. Effect on businesses – what you need to do This change affects any VAT registered business that sells or purchases goods or services that are subject to the standard rate of VAT. You should charge standard rate VAT at the new rate of 15% for any sales of standard rated goods or services that take place on or after 1 December 2008. My prices are VAT inclusive. How do I calculate the new rate? If you’ve charged a VAT inclusive price, you should use the VAT fraction to work out the VAT element. The VAT fraction for the 15% rate is 3/23. Will I need to change my till? Many retailers have till systems which calculate VAT at the point of sale. If you use an electronic system to record retail sales you will need to make sure it is adjusted to take account of the new rate with effect from 1 December 2008. You may need to consult the manufacturer or supplier of your particular system to find out how to make the necessary adjustments. Do I need to change my Sage accounts program ? Yes. From 1st December 2008 you will need to alter your sage program. Different Sage programs and versions have different ways of altering these codes, but generally Settings, configuration, Tax Codes Will get you to the area to change the rate from 17.5% to 15% How much do I need to reduce my prices by to take account of the reduction in VAT? To reduce your VAT inclusive prices to reflect the reduction in the VAT rate to 15% you should multiply your old prices by 115/117.5, which is equal to 46/47. Do I have to pass on the VAT reduction to my customers by reducing my prices? The Government is making this change as part of a broader package of fiscal measures to give the economy a boost. Passing on the tax reduction through reduced prices will stimulate consumer spending and mean that both businesses and consumers benefit from this change. However, ultimately decisions on prices charged by your business and paid by your customers is down to you not the government. Do I have to alter my stationery and invoices? Yes. If your invoices show “Vat at 17.5%” this needs to be altered to “VAT @ 15%” What about refunds? If you give a refund on or after 1 December 2008 for a sale you made before 1 December, you will have to adjust your daily gross takings to take account of the VAT originally charged at 17.5% by using the VAT fraction of 7/47. How do I complete a VAT return if it covers both the old rate of 17.5% and the new rate of 15% ? You will have to make two separate calculations for periods up to 30th November 2007 and also from 1st December 2008 and then add them together to complete one VAT return. If I am on a cash accounting scheme how do I claim vat back after 1st December 2008 ? If you claim vat back on purchases on a cash accounting scheme e.g. when you pay for the items you will have to identify every payment after 1st December 2008 and work out if the payment relates to invoices at 17.5% or 15% Will the rate change affect my flat rate percentage if I am on a flat rate scheme? Yes. The table of flat rates has been changed to reflect the new rate of VAT. Please contact us for your new business sector flat rate charge. What happens if I have already have quoted for jobs at 17.5% ? You do not under normal circumstances have to reissue quotes. All you have to do is charge vat at the lower rate of 15% when you issue the invoice. Any further questions…… Ring us on 01423 561732