VAT rate switch: Easier in the Cloud?

The return to the 17.5% standard VAT rate on 1 January 2010 has become a rallying point for Cloud accounting developers, who claim it demonstrates the advantages of web-based software.

Chancellor Alastair Darling confirmed last week in his Pre-Budget Report that the interim standard rate of 15% introduced last December would revert as planned to 17.5% at midnight on New Year’s Eve (with special provisions for cash-based businesses such as pubs and clubs that traded over the deadline).

Having dealt with the original switch in December 2008, most businesses should be able to remember how they altered the default rates within their applications. But as AccountingWEB.co.uk’s VAT rate change tutorial makes clear, complex rules apply to the rates that should should be used for credit notes issued after 1 January and late or partially paid invoices.

For most products and services the basic tax point is the date on which the supply was actually made. If an invoice is raised more than 14 days after the basic tax point, then it reverts to the original date of supply rather than the invoice date. More complications arise for those who make continuous supplies or issue annual invoices for ongoing services.

Cloud developers have been quick to point out how much easier it is for their customers to cope with the change. NetSuite issued a press release advising users they would be able to comply with the changes “without having to lift a finger”, while representatives for Arithmo, e-conomic, FreeAgent, KashFlow, Liquid, Pearl and Xero have confirmed in AccountingWEB.co.uk’s Cloud accounting discussion group that their systems were all set up and ready for the switch on 1 January.

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