VAT rate change to 17.5% on 1 January | AccountingWEB

VAT rate change to 17.5% on 1 January

We've received a press release from NetSuite announcing its plans to support UK customers when the VAT rate returns to 17.5% on 1 January.

NetSuite is not the only software vendor to have an interest in this subject. As with the rate reduction last year, the change will mean businesses need to adjust their accounting and e-commerce systems to be compliant. As a cloud-based system, NetSuite argues that it makes it easier for customers to adjust by making the changes in the accounting engine.

I would imagine the same applies to other Cloud accounting developers - what provisions have you made to make the switch? And while it may be technically easier for you to effect the change, what are you doing to help customers account for the new rate and to ensure the complete their VAT returns correctly? And do your systems cope with the Flat Rate Scheme, which has also changed?

While you may slag off the on premise vendors for their inflexibility, because they have to put so much effort into communicating the change and how to make it, they are often better at counselling their users on the accounting side of things - have a look at what Sage subsidairy Pastel is doing (PDF). The VAT rate increase tutorial from's own Rebecca Benneyworth is another useful resource.

Over to you...
John Stokdyk, Technology editor

DuaneJAckson's picture


DuaneJAckson | | Permalink

Our approach is to do it automatically. At the moment our users see a message on their dashboard explainign the changes. If they click the button to confirm they want to have their accounts automatically updated then they get added to a list of users who will automatically have their default rate and rates on repeat invoices updated at midnight on 31/12/09.

I wouldn't have thought the FRS changes are a problem for most. As long as the user knows tha rate they should be on they just change that setting themselves.

Where FRS gets fun is if a user has a reporting period with 31/12/09 in the middle of it. They need to report partially on the new rate and partially on the old. We have provided a solution for this

We posted full details on this to our blog earlier this month.

garyturner's picture

All over it like a bad suit

garyturner | | Permalink

It's pretty simple for Xero users, too. And we feel like we've communicated pretty well - something we wouldn't use a press release to do, however.

We are communicating the changes directly to UK users in product through a dashboard notification, our Help Centre and through our blog, Happy New VAT rate! and Flate Rate VAT.

I suspect Netsuite's target is larger and more complex competitors in whose customers there there may well be some enforced sobriety on Dec 31 to nurse their systems through the changes.

We expect our customers will partying into the wee small hours.


It isn't changing again is it ?

Anonymous | | Permalink

We are only just getting our CDs out for last years change, maybe we won't bother if it is changing back.

What is this cloud thing everyone is talking about ?

Richard Messik's picture

e-conomic is very flexible for this

Richard Messik | | Permalink

I have just made the relevant amendments in e-conomic. The system can deal with multiple rates so that if a user issues a sales invoice on  - say - 2nd January 2010, dated 31st December 2009 the lower rate can be selected and if the invoice is dated post 1st January the higher rate can be used.

dialm4accounts's picture

FreeAgent - we're ready too

dialm4accounts | | Permalink

At FreeAgent we've programmed in both rates to give added flexibility for our users, so that they can choose the appropriate rate for invoices for which the special rules apply, e.g. a service provided before 31st December 2009 but invoiced after 1st January 2010 could be issued at 15%.

We have also programmed in the new VAT flat rates so that our users issuing invoices after 1st January 2010 will be using the correct rate.

We've told our users about this via our newsletter and our blog, as well as on our GetSatisfaction forum.

So our users are reassured that we're on the case and will be joining Xero's customers for the New Year's Eve party.

Or having their own of course :-)


Greyoltwit | | Permalink

Compare and contrast SAGE which the user needs to change manually and even then will produce inaccurate reports for periods that straddle the rate change - e.g quarter to 31/1 - and for which special bespoke reports have been created. What a palaver.

John Stokdyk's picture

Thanks for helping with my research!

John Stokdyk | | Permalink

I'm preparing a piece on this for and and while the VAT rate changes are a very good way to highlight the differences in managing on premise and on demand software updates, I still get the distinct whiff of opportunism in some of the publicity flying around.

Much of it is replaying what happened a year ago when the rate was increased - and since businesses and accountants had to navigate their way through that switch, a large number of them are likely to still have in their heads what they need to do to reverse it by changing VAT default settings, or reverting to the previous code, as Pastel instructs. Of course, a large number of firms will probably have forgotten what they did 12 months ago.

Richard raised an important point though - as our VAT turorial explains, the biggest complication is how you deal with old invoices, credit notes and trasactions that cross over the changeover date, for whatever reason. Good to hear that Kashflow, e-conomic and FreeAgent are capable of handling these scenarios. But do the same facilities apply across the board?

Thanks too to Greyoltwit for alerting me to the Sage reporting issue. Seems like I've got a bit more poking around to do.
John Stokdyk, Technology editor

Richard Holmes's picture

Same as last year

Richard Holmes | | Permalink

Hi John, sorry I hadn't realised you were keeping a list.

Of course, it's sorted in Liquid too, just like last year- clients informed through their dashboard and an old rate code available for old transactions.

Merry Christmas to all


PS like the CD comment- just checking with my team if it was one of them that dared to be so cutting!!

julianshaw's picture


julianshaw | | Permalink

It should be easy enough for any cloud software to roll out the change automatically. Set the date of change and then let the system do the rest, make sure Flat Rate scheme is dealt with and allow for an override for things like the extension after midnight on 31st. Other than telling users what's going on, that's it really.

Like John says, a bit of opportunism here. Given the apprehension amongst accountants though, we owe it to them to highlight benefits such as this. It's a practical example of where cloud based software has an advantage.



John Stokdyk's picture

Adding to it as I go along

John Stokdyk | | Permalink

Thanks Richard & Julian,

I've added your applications to the article just published on and will keep both it and the version updated as new material arises. As part of our research into Cloud accounting apps in general, I'll be doing some poking around the various applications in the next 2 weeks or so to see how they all cope with the niggles and nuances that crop up with the rate switch.

PS - This discussion group has proved particularly helpful to me in getting quick feedback on the story. I hope it's been of use to both the developers and users among you.
John Stokdyk, Technology editor

david_terrar's picture

Twinfield's OK too

david_terrar | | Permalink

Hi John,

From Richard's comment earlier it sounds like Twinfield's approach of usng a rate table with old and new available is the same as e-conomic's.  We're sending out a bulletin to customers in our newsletter.

David Terrar

D2C and Twinfield

Youthful agility vs. old and doddery

Anonymous | | Permalink

My anti-virus software is "on premises" but is always up to date.

Is this really about delivery medium ?

Hugh Scantlebury's picture

Aqilla - very straightforward for our customers

Hugh Scantlebury | | Permalink

...and of course it keeps the previous VAT analysis intact too.

david_terrar's picture

Hybrid on premise and SaaS virus software

david_terrar | | Permalink

Hi anonymous,

Lile most anti-virus and spyware products, what you've got there is a a good on premise/desktop product, coupled with a SaaS update service provided by the author.  It's always up to date, but only providing you've got an Internet connection and an auto update process running.

SaaS can be aything from a full suite of programs to a plug in component such as linking your application (of any kind) to Google maps. 

David Terar

D2C and Twinfield

Getting a bit blurry

Anonymous | | Permalink

So if my desktop bookkeeping software prompts me to install an update from the internet - is that SaaS ?

david_terrar's picture

Not blurry at all, just hybrid

david_terrar | | Permalink

Hi anonymous,

Your desktop product is on premise.  The update service the author is giving you  is actually some software provided to you as a service over the Internet (instead of sending you a CD/DVD through the post).  That's actually SaaS (and so a Cloud based service), but don't tell anyone, the label will frighten a lot of people off.

David Terrar

D2C and Twinfield

Whole range of cloud

Anonymous | | Permalink

So there is a whole range of cloud, from the high altitude cirrus, right down to ground-hugging fog.

I am waiting for the "altocumulus floccus with virga" sub group. 

david_terrar's picture

Types of Cloud

david_terrar | | Permalink

Hi anonymous,

Yes, the Cloud metaphor leads us down a very misty path to a whole set of new meteorological jargon, and I don't wish to go there...

Freeform Dynamics wrote a cool "Cloud Computing for Dummies" mini book for Microsoft, which has a neat diagram on this very subject.  No online version yet, but I used it, with their permission, on slide 7 of this presentation:

(UPDATE - just spotted you can upload images with comments - cool! - see the diagram attached below - click on it to see it enlarged)

It lists the different types of Cloud components, including platform (aaS) and infrastructure (aaS).  So SaaS can cover a whole range of services delivered over the web - business appications, productivity tools, communication tools, social tools, trading communities and plug-ins. 

David Terrar

D2C and Twinfield

Images - nice feature

Anonymous | | Permalink

Looks like one of the rorschach blot tests. I see a reindeer - what does that mean ?

Fusion Accounts's picture

Ready for the VAT rate change

Fusion Accounts | | Permalink

Fusion Accounts is also ready for the VAT rate change.

The VAT rate change will result in the following automatic changes -

1) All products with a 15% vat rate will be changed to a 17.5% rate.

2) The default rate of 15% will revert to 17.5%.

The 15% rate will still be available from the vat selection for transactions dated before 01/01/2010

A question ..

JC | | Permalink

Interesting approaches being taken with VAT by the web-based community

Is a centrally managed VAT Rate a good thing or should the user be in charge of their own destiny; after all it surely revolves around a VAT table & rules (with all necessary fields - i.e. start date, rate, EC flags, show on report etc..)?

Yes there are down-sides of allowing users this flexibility but what are the merits with playing 'big brother' rather than allowing the users choice wrapped in a tax generic model?

Also, if rates have to be 'hard coded' doesn't that defeat the flexibility of these system and make porting to other tax regimes more onerous?

Hugh Scantlebury's picture

Good question JC

Hugh Scantlebury | | Permalink

....actually with Aqilla, VAT is configurable down to the individual company / organisation so in effect people can still exercise their own control. This is how the software is able to cope with multiple taxonomies. 

Whether Cloud / SaaS / Web Based whatever, it's still an improvement on having to supply CDs to install in every on-premise instance. In some cases this does not even mean doing it only once just to the core finance system. One retail company I was talking to the other day, was having to apply a software patch to every one of their Windows NT (yes, I know it's obsolete but lots of people still use it) based POS systems. Not the kind of thing you want to do midway through a busy sale period!

re. POS

Anonymous | | Permalink

... but imagine the chaos if my local Tesco lost its internet connection and all the checkouts stopped working.

Hugh Scantlebury's picture

On the other hand...

Hugh Scantlebury | | Permalink

....last Christmas one of the Sainsbury's checkouts "died" whilst Mrs S was doing the Christmas shopping. Unwilling / unable to deal with the failiure immediately in order to restart the checkout process, the operator and store manager chose to "guess" the value of shopping in a hugely generous fashion. Result: Bargains galore!

Happy Christmas everyone!

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