One in 10 firms unready for VAT switch

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More than one in 10 businesses has yet to contemplate what to do about the impending increase in the standard rate of VAT to 20% on 4 January, according to a Sage survey.

The business software provider surveyed 1,500 of its customers about the rate change during November and found that while 68% of small business respondents were anticipating the change, 11% had not yet contemplated what to do and 7% were concerned about their lack of preparation.

Sage VAT specialist Suzanne Wardingham noted that the latest increase follows the reduction of the standard rate to 15% followed by a return to 17.5% in January 2010. So taking in another 2.5% increase on 4 January 2011 should not be such a daunting task.

“As before, SMEs will have to decide whether they want to pass the costs on to their customers. However, as the VAT increase takes place on the 4 January rather than the 1 this time, there will be some businesses that have to complete a VAT return incorporating both standard rates of VAT. Where this is the case, we strongly recommend that the business owners seek advice from either their accountant or HMRC if they are unsure,” she said.

 “It’s likely that accountants will be busy with clients’ self-assessment returns towards the end of the year, so consult with them early on to understand how the change will impact day-to-day transactions.”

Wardingham urged businesses to be good to their customers. “If possible invoice them in plenty of time before the change, so they will not incur the higher VAT rate and will appreciate the gesture. If you need an excuse, you can use it to send an extra early Christmas card.”

VAT rate change resources
AccountingWEB expert guides and Any Answers questions/replies
HMRC VAT rate change resources
Sage VAT microsite

About John Stokdyk

John Stokdyk is the global editor of AccountingWEB UK and


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