20% VAT rate - The Cloud Perspective
You may have already seen a similar posting in the Budget Group, but this posting takes a SaaS Cloud perspective ....
As George Osborne and the UK coalition has decided to raise standard VAT to 20% from next January, "usefully" on 4th January rather than on 1st , at least we have the chance to prepare properly for the rate change. This applies to people both in business and in practice, and to the authors and vendors of financial software.
The rate rise is especially relevant to SaaS Cloud services, both for vendors and users. Understanding clearly who is going to do what when will be critical. Users remain responsible for VAT compliance, so:
- What will users be able to control themselves?
- What will need to be done by the vendor, both in preparation and during the transition?.
Everyone will want to keep additional admin and/or development costs to a minimum. Given the possibility of VAT penalties, everyone needs to be careful - especially with PI implications for practising firms and others providing outsourced back-office services.
With only a few days' notice of the reduction to 15% in 2008, and the subsequent reinstatement of the 17.5% rate, I produced a series of articles then on the key system issues.
Although the increase to 20% is similar, it will be different in both the principles and practical application. I have written an article that sets out some pointers in these key aspects:
- Commercial impact
- Sales pricing
- Issues for software and SaaS services
- Additional issues for users
The article provides tips for software authors and vendors (many of the issues apply equally to on-premise packages), plus an overview for users of what to expect and to do themselves.
I'm encouraging both vendors and users to comment on how their specific software is going to cope with the rate change, which I trust will add value.