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- Use the Standard VAT of 17.5% for 1 January, 2010
Updating your company file to use the Standard VAT of 17.5% for 1 January, 2010
In November, 2008, the Chancellor announced a temporary decrease on the Standard Rate VAT to 15% for a period of 13 months, commencing 1 December, 2008. On 1 January 2010, the Standard Rate VAT will revert back to 17.5%. For more details regarding the Standard Rate VAT changes, visit the HMRC Web site.
To determine which Standard Rate VAT you need to use for transations that span 1 January, 2010, please refer to the HMRC detailed VAT Guidance. If you are still unsure of the rate to use, please contact the HMRC National Advice Service at (0845 010 9000).
The steps you need to follow to update your VAT code depends on many things. Please review the following information to determine which instructions apply to your specific situation.
The way in which you handled the temporary VAT change last year determines the option you need to follow to change your VAT back to 17.5%. Choose the option that matches your situation.
- If you created a new Standard VAT code, follow these instructions
- If you edited your existing VAT code, follow these instructions
Because we are not sure how you handled the temporary VAT change in QuickBooks, you can choose from one of the two options to change your VAT back to 17.5%.
Note: If you are using QuickBooks SimpleStart, you can only choose option 2.
Option 1: Create a new Standard Rate VAT code.
This option is not applicable to SimpleStart.
Here are the pros and cons of this option.
| Positives | Negatives |
| Preferred HMRC solution | Time consuming process – the time required to complete these steps may exceed a full working day |
| Manual VAT calculations will not be required when editing transactions created before 1 January, 2010 using 15% Standard Rate VAT | Setting up new VAT codes is a complex process - the instructions provided must be followed without error |
| Best solution for VAT reporting and audit purposes | Requires a good knowledge of VAT reporting to check the new VAT codes have been set up correctly |
| Not applicable to SimpleStart |
Option 2: Edit your existing Standard Rate VAT code.
Here are the pros and cons of this option.
| Positives | Negatives |
| Quick – the time required to implement this solution is expected to be less than 30 minutes | Not the preferred solution of HMRC |
| VAT reports will be correct (if applicable, manual calculations on transactions have been completed) | Relies on employee vigilance when entering and modifying transactions to ensure that the correct VAT % has been calculated (manual VAT calculation may have to be performed when entering transactions) |
| Audit possible but relies on use of VAT code description to identify % rate used in the calculation shown on the Audit Trail report | Requires a good knowledge of VAT reporting to check the new VAT codes have been set up correctly |
| Applicable to SimpleStart | The VAT summary on the invoice displays the % set up in the VAT code (this will display at 15% for current and historical invoices) |
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