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VAT cut good news for Banks
The cut in the VAT rate will actually be a piece of good news for banks, who being zero rated have to account their costs as gross of VAT so leading to a direct reduction in their cost base and leading to an increase in bottom line profitability. I suspect that this will not help to restore their confidence to lend again and also suspect that it is an indirect impact that the chancellor had not thought of otherwise more would have been made of it as part of the PBR!
Tills
I was just about to post a comment about the HMRC comment on tills and manual calculation but Michele Shapland said it more than adequately. The queues for the morning paper (zero rated) on 1 December will be four times as long if any one is buying cigarettes (VAT down to 15% but tobacco duty up by 4%) from a corner shop.
By the time, you have got used to the manual calculation the old rate will be back or perhaps it will be some other rate. Does anyone know which market NCR shares are traded on? PS not a real question
Small Businesses Worse Off
In spite of the VAT Rate cut, small businesses using the VAT Flat Rate scheme will be worse off since HMRC have rounded to the nearest half percent in their favour. So much for the chancellor wanting to help small business.
Apologies
Thanks Anne and Jonathan, you're right of course. In my defence I did check the latest CCH Hardman's tax tables but they only go back to 1975!
So the good news is that anyone is still running their accounts on software they were using pre-1974 they should be OK with the rate change.
Implications for computer systems?
The article highlights some of the problems affecting bookkeeping and computer systems. I've set up a blog to collect other issues and tips - see www.camwells.co.uk/vatratesystems
Reduction in VAT rate
this is an extract of the guidance published on HMRC re vat reduction :"Q6 What about tills?
You may also be able to adjust your electronic till yourself – if necessary you’ll need to contact your till supplier for assistance. But don’t worry: if your till has not been amended to calculate 15% (rather than 17.5%) by 1 December you can always calculate the VAT manually.
You simply take the standard-rated gross takings calculated by your till and multiply that sum by the new VAT fraction of 3/23 – this will give you the amount of 15% VAT."
This is a joke surely. The majority of people using tills don't seem to be able to add up this days so I have vision of long queues at tills with customers having to wait to find out how much they have to pay!!!!
Another administrative burden on businesses which will prove inefficitient and a complete waste of everybody's time and money...
If he wanted to help the low paid and save on public spending then this is what he should have done:
People on low income (less £15000 per annum pay no tax/nic) at all and get an extra personal allowance for each child that they have to make up for one of the parent not being able to work or having to pay child care and scrap the farce that is tax credits. This would encourage people to go out to work rather than stay at home and take hand outs..
For pensioners: any who is entitled to the age allowance in full should not pay any tax at all and get an increase in state pension to give them a minimum income of £1000 per month.
To pay for this all MPS should all take a pay cut and stop receiving free allowances towards a second home in London. They should claim expenses like the rest of the employed population and all public servants should work until they are 65 years old like employees in private sector.
A very grumpy tax adviser
Already invoiced pre-payments
I have many of my clients on standing order. They pay up-front for work either at the end of the year or during. I issue a VAT schedule/invoice for the year.
Where I am in the middle of a VAT schedule by 1st December, do I have to re-invoice with the amended rate?
better down than up
Sadly rises in VAT aren't unprecedented either. It was introduced and subsequenty raised by various Tory governments - they love a bit of it!
Maybe you weren't born then!
"A reduction in the rate of VAT is unprecedented" - NOT!
The "standard' rate of VAT was reduced from 10% to 8% in 1974.
Please keep up to date on your homework.
Jonathan
Jonathan Sheard BSC (MechE) CA CPA FCCA FIMI Realtor
General Manager/Member
Sheard, LLC
CPA, Real Estate Brokerage & Used Vehicle Dealer Services,
Dallas, Texas, USA
Earlier cut in VAT?
A cut in VAT isn't quite unprecedented - I seem to recall a reduction from 10% to 8% in the 1970s.
It's just that there weren't many computers around then.