Cut in VAT to 15%

deanshepherd

Anyone else think that the administrative burden placed on businesses to change their systems down to 15% only to increase them back to 17.5% a year later will more than swallow up the negligible 2.5% saving to the consumer?

Bluewednesday

That is if they pass it on I guess

In the olden days (when VAT went from 15% to 17.5%) I worked in record shop - really showing my age now - so every line had to be repriced on thousands of lines! It took us over a week to do it!

However there were a lot of companies who just swallowed the 2.5% which makes me wonder if they'll do that again?

kazzymac

I agree with you - what a total headache VAT is! Most people I have spoken to personally wont be spending any extra on these consumables which we should now be tempted to buy but will merely save it or use it for the shortfall in other rising costs! It will cause a few headaches I expect in the meantime and I am assuming that the fuel rate of 5% remains unchanged?

claudialowe

Totally pathetic - and what about the FRS? I don't suppose that they are going to chase the rates for that are they :thumbdown:

I think that most companies will keep the prices the same to bolster their profits - can you imagine the work involved for a supermarket to print new labels for every item for every store - and - change them between closing on Sunday night and opening on Monday morning :blushing::blushing::blushing:

I won't invoice any of my non-VAT registered clients between now and next Monday :thumbup1:

What about though people on standing orders?????? Do we get those changed???? My invoice for the year is dated when VAT was at 17.5% but part of that money will be collected when it is only 15% :confused1::confused1::confused1::confused1::confused1::confused1:

I think I need a drink!!! Perhaps I will spend the increase in the kids child benefit in advance of getting the money!

Claudia

Poodle

claudialowe wrote: »

I won't invoice any of my non-VAT registered clients between now and next Monday
Claudia

A problem for me as well as I also collect payments on account and have paid over the VAT on those payments at 17.5% as well, prior to invoicing. I suppose we should raise interim invoices dated the 30th November and then final invoices when we have done the work. Dunno.

This will also affect some of my clients who collect like this as well, will have to phone them :mad2:

I was around before as well BW and I remember the logistcal problems then as well, I can't see how they will not be able to adjust the FR.

I do not see anyone rushing out and spending on the back of this.

What about the increase in fuel surcharge then? Right stinker eh?

Poodle

deanshepherd

They must change the way the flat rate VAT is calculated because every one of those businesses would be considerably worse off if they didn't.

In fact, anyone with a rate of more than 13% would end up paying over more to HMRC than they collected!!

With regard to payments on account, there is no way I am going to go through the rigmarole of amending them all just for 1 year. I would rather write my clients a cheque for the 2.5% than go through that!

Poodle

Hi

All is disclosed here

http://www.hmrc.gov.uk/pbr2008/vat-guide-det.pdf

Poodle

deanshepherd

Nice find poodle.

I have done some preliminary calculations for various sectors and every one will be better off with the new flat rates. (Edited to add: Er.. everyone is actually a little worse off - best get billing before the end of the week!)

Most rates above 9 have dropped by 1.5% and others by 1%.

mc25

I bet phone will be ringing alot 2day from clients asking for help. For those of you who have got clients with stock. wish you luck. :001_smile:

claudialowe

OK guys - another day - more problems.

VAT quarters that straddle the changeover:

1. Do you work out the FRS in two steps ie say 1/3 at old FRS and 2/3 at new FRS?

2. Ditto for fuel scale charges - do they need to be apportioned?

Just as well that they have said that they will apply a light touch - because there is no chance of any mistakes being made is there :confused1:

Personally, I think he would have helped the worst off much more by reducing VAT on domestic fuel to 0%, and then only the utility companies would have had the problem, and not everyone in the country.

Claudia

A-Vic

Wanted to check something are they keeping 17% on VAT for Beer Cigs and Fuel?

claudialowe

No! But on fuel he has increased the duty to "compensate" for the reduction in VAT :confused1: So in effect for businesses the price of fuel has gone back up again :thumbdown:

Claudia

Poodle

Hi Claudia

If the VAT period straddles the 1st December run two VAT returns on two short periods. One on the old rules and on on the new. Then just add the two together for the VAT100

Poodle

deanshepherd

In answer to your questions Claudia..

1) Yes
2) Yes

Enjoy!

A-Vic

claudialowe wrote: »

No! But on fuel he has increased the duty to "compensate" for the reduction in VAT :confused1: So in effect for businesses the price of fuel has gone back up again :thumbdown:

Claudia

Aww yes just heard the same Thanks.

T.C.

Thanks Poodle for the link to the VAT changes on HMRC site. I couldn't seem to find any relevant details on the flat rate scheme. Much appreciated. TC

axl2derv

The solution is simple and I think a lot of businesses will do this...

Keep the same Gross price and increase the Net so when you add 15%, you don't have to change the price tickets and do all the other admin etc.

Example.

A £40 pair of shoes…

£34.04 Net
£5.96 Vat (17.5%)
£40.00 Gross

Up the Net…

£34.78 Net
£5.22 VAT (15%)
£40.00 Gross

Call the £0.74 Net price an increase in admin expenses or a profit margin adjustment. The businesses are just going to pocket the £0.0213 pence in every pound to save the hassle. The net profit at the end of the year will just be higher so more tax is payable by the business.

Even if the Gross price of the shoes was reduced to £39.15, why would somebody suddenly be able to afford the shoes because £0.85 was reduced off it?

It was a stupid idea, Darling should have cut the rate on income tax or increased the threshold on income before tax is payable.

deanshepherd

I agree that it was an ill thought out idea but what you are suggesting is exactly what many people are campaigning against!

What is the point of reducing the rate of VAT if the businesses are just going to pocket the difference?

The supermarkets in particular will be under scrutiny to pass the savings on to customers.

A-Vic

How to change the vat codes in sage

Found an article on sage if anyone needs it

http://www.sage.co.uk/PDF/VAT%20changes%20article%2022891.pdf

Also this link if needed

http://www.sage.co.uk/news/vat_changes.aspx

Poodle

I received my letter from HMR&C yesterday and I am really glad that I contacted my VAT cients and gave them some additional help.

I remain unclear however regarding the transitional rules with deposits having been already taken from clients and output VAT having been paid over to HMR&C but where no invoice has actually been raised. Fine if you have raised an invoice instructions are provided for this, just raise a credit note dated the same as the invoice.

If work has not been or, will not be completed by the 1st for deposits already collected obviously an adjustment will have to be made. It is the timing of this adjustment that I am unsure with, can it be made on the 1st December or would it be made when the invoice for the work that the deposits have been collected for, is raised?

I did get through to one of the technical people on the VAT helpline but got disconencted when put on hold!!

The reason for my question is that potentially someone operating a flat rate scheme and having colected deposits will be able to get a repayment of VAT, but I do not want to advise collecting this back on the 1st December and then being told that the basic tax point should have been used as opposed to an adjustmet to the actul tax point:001_unsure:

TC i agree that there are no clear instructions, that I can find, regarding the flat rate scheme, especially if using cash accounting. But I am sure that Sage is on the case:laugh:

Poodle

T.C.

Having spoken to some clients it seems that those customers to benefit will be those where prices have been quoted, plus VAT, ie the plumbers and builders. Others, such as pubs and restaurants, are not planning to change their prices at all. Obviously the small business will benefit, which is a good thing, but their customers will not.

A-Vic

I wonder what measures HMRC will take if the VAT cut isnt passed on??? if any at all

Poodle

A-Vic wrote: »

I wonder what measures HMRC will take if the VAT cut isnt passed on??? if any at all

There is nothing that they are able to do as long as VAT is applied to prices correctly, profit margins are not up to them.

The reduction was inteded to kick start the economy :laugh: not small business pofits

Poodle

A-Vic

Poodle wrote: »

There is nothing that they are able to do as long as VAT is applied to prices correctly, profit margins are not up to them.

The reduction was inteded to kick start the economy :laugh: not small business pofits

Poodle

so all that fuss for nothing in a sence and then once it starts to set in it changes back so why bother :laugh:

T.C.

So basically, we won't expect too many prices to go down with the VAT reduction, but I bet will will see them all go up when VAT rises again! :001_smile:

deanshepherd

You old cynic you..

A-Vic

Also when they rise to 18% in 2011 they will deffo raise them

Jan

axl2derv posted

Keep the same Gross price and increase the Net so when you add 15%, you don't have to change the price tickets and do all the other admin etc.

Example.

A £40 pair of shoes…

£34.04 Net
£5.96 Vat (17.5%)
£40.00 Gross

Up the Net…

£34.78 Net
£5.22 VAT (15%)
£40.00 Gross

Dean commented

I agree that it was an ill thought out idea but what you are suggesting is exactly what many people are campaigning against!

What is the point of reducing the rate of VAT if the businesses are just going to pocket the difference?

The supermarkets in particular will be under scrutiny to pass the savings on to customers.

Having just reread the letter from HMRC re VAT changes it advises that if electronic tiils have not been amended by 1st Dec to work new VAT manually. " Simply take the standard-rated gross takings calculated by your till and multiply by the new VAT fraction of 3/23 - this will give you the amount of 15% VAT"

Am I missing something or isn't that exactly what axl2derv said above :confused1: ?

I'm having enough trouble explaining all this change to my husband who quotes including VAT, but never at what rate! I'm passing on the saving to our customers from tomorrow, much to his horror, He thought it was costing him 'cos he paid VAT @ 17.5% from the supplier, till I showed him the difference that would eventually be paid to HMRC! :001_rolleyes:

PS Just a pity we had a new boiler fitted last week @ 17.5% !! :-(