From SortMyBooks: www.sortmybooks.com 

The Revenue Commissioners have made another change to the VAT – do you know that this is the 3^rd change within 18 months?? Firstly they changed the VAT periods from being 2 months to being either 2 months, 4 months or 6 months, then they brought in new rules for sub-contractors and principal contractors which mostly impact the construction industry and now they have changed the VAT rate from 21% to 21.5%.

The timing of this is a little odd in that the Revenue normally give us some time to implement changes but in this case they’ve pushed it through halfway through a VAT period which suggests they’ve done it deliberately to cash in on the Christmas season.

Read on to see how the change in the VAT rate affects your business:

VAT Registered and selling exclusively to businesses

Anything you have been selling at 21% is going to go up because you now need to charge 21.5%. If you usually quote VAT exclusive prices then all you need to do is start charging VAT on your sales invoices at 21.5% from 1^st December. Download the SortMyBooks upgrade and from 1^st December start using the 21.5% VAT rate.

VAT Registered but do not sell anything at 21%

You do not need to do anything to your prices but you are going to start being charged 21.5% by your suppliers from 1^st December so you need to download the new VAT Rates file so that you are reclaiming the correct amount of VAT.

VAT Registered and selling to consumers

You are going to have the most work to do because you have to raise your prices now in time for 1^st December 2008. Everything that you sell currently at 21% is going to have to be increased to include 21.5% VAT. See the example below:

If your till is programmed to calculate the VAT then you’re going to have to change those rates to 21.5% also. Download the SortMyBooks upgrade so that you are reporting and reclaiming the correct amount of VAT.

I am on cash receipts basis for VAT does this mean I now have to pay over 21.5% even though I only invoiced at 21%?
No. You sent out your invoice at 21% so your customer will reclaim only 21% therefore you are entitled to pay over that VAT at 21%. If you are using the Lodgments Wizzard in SortMyBooks then it will be handled automatically for you. If you are using the All Lodgments Bookkeeper then choose the same VAT rate that you sent the invoice out as. If in doubt about how to handle it for your own business then please get clarification from the Revenue Commissioners. Here is the quote from page 92 of their VAT guide ‘A trader who has been authorized to account on the moneys received basis is liable for VAT at the rate applicable at the time the goods or services are supplied and not at the rate applicable when payment is received.’ http://www.revenue.ie/leaflets/vatguide_2008.pdf 
 

Other things to consider:

If you have printed price lists around the place then remember to change those also.

If you are using spreadsheets to calculate pricing and margins remember to change any of those formulas for the 21.5%.

From SortMyBooks: www.sortmybooks.com 

This entry was posted on Friday, November 7th, 2008 at 10:41 am and is filed under VAT, Cool Tools, Financial Control. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.