How do I update my company file to use the new Standard Rate VAT of 17.5% for 1 January, 2009 by creating a new VAT code?

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Create new VAT code for Standard Rate VAT of 17.5%

Updated: Dec 08, 2009

Article ID: 4471

This is a rather lengthy article. We recommend that you print it and follow along using the printout.

This article applies to you if you were using QuickBooks after December 2008. If you were using QuickBooks prior to December 2008, read this article instead.

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%. If you track VAT, below is information you will need to make the necessary changes in QuickBooks. For more details regarding the Standard Rate VAT changes, visit the HMRC Web site.

To determine which Standard Rate VAT you need to use when your transactions 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).

Checklist

Here is a checklist of steps you must follow to change your VAT back to 17.5% by creating new VAT codes. As you follow the steps, check them off here when you've completed them

Steps	Done
create new VAT items*
create new VAT groups*
create new VAT codes
update default VAT code inthe VAT Preferences section (if needed)
update customer VAT codes (if needed)
update supplier VAT codes (if needed)*
update items
update accounts
update memorised transations
progress invoices and other business forms

*QuickBooks 2008 only

EC codes, items, and groups are not required for cash accounting.

Create new VAT items (applies only to 2008)

Refer to the table below for recommended VAT items.

Go to the Lists menu and click Item List.
Click Item at the bottom of the list and click New.
Click the Type drop-down list and choose VAT Item.
Enter a name for the item. The name is for your own use.
Optional - Enter a description. This will auto fill with the item name. You can modify this if required.
Enter the applicable VAT Rate %.
Select the applicable VAT Agency.
Using the drop down list, specify which VAT Return Box the item must be reported in.
Click OK.

Table of required new VAT items and VAT groups

VAT Name	Description	VAT Rate % or Amt	VAT Agency	VAT Return Box	VAT Item/ VAT Group	Required for cash accounting?
Standard Purchases	Standard Purchases	17.5%	HMRC VAT	Domestic Purchases (Box 4, Box 7)	VAT Item	Yes
Standard Sales	Standard Sales	17.5%	HMRC VAT	Domestic Sales (Box 1, Box 6)	VAT Item	Yes
EC Purch Goods Standard	EC Purch of Goods Standard	-17.5%	HMRC VAT	EC Purchases of Goods (Box 2, Box 9)	VAT Item	No
Reverse Charge Purch Standard	Reverse Charge Purch Standard	-17.5%	HMRC VAT	Reverse Charge (Carousel/MTIC) (Box 1, None)	VAT Item	No

Group Name/Number	Description	VAT items included in group (must be entered in the order shown)	Item/Group	Required for cash accounting?
EC Purch Goods 17.5% Group	EC Purch of Goods Group	Standard Purchases EC Purch Goods Standard	VAT Group	No
Reverse Charge Purch 17.5% Grp	Reverse Charge Purch Group	Standard Purchases Reverse Charge Purch Standard	VAT Group	No

Create new VAT groups (applies only to 2008)

Refer the table below for recommended VAT groups.

Make sure you have already set up all of the single (flat rate) VAT items you need to set up the VAT group item.
Go to the Lists menu and click Item List.
Click Item at the bottom of the list and click New.
Click the Type drop-down list and choose VAT Group.
Enter a name for the group.
Optional - Enter a description. This will auto fill with the item name. You can modify this if required. This prints on your sales forms. You cannot edit the description on the forms themselves.
Click the first line in the table at the bottom of the New Item window. Then, click the VAT Item drop-down arrow. Choose the first VAT item you want to include in the group, then press the Tab key on your keyboard.
Repeat until you've added all of the VAT items to the group.
Click OK.
If you haven't already done so, create a VAT code to represent the VAT group.

Table of required new VAT items and VAT groups

VAT Name	Description	VAT Rate % or Amt	VAT Agency	VAT Return Box	VAT Item/ VAT Group	Required for cash accounting?
Standard Purchases	Standard Purchases	17.5%	HMRC VAT	Domestic Purchases (Box 4, Box 7)	VAT Item	Yes
Standard Sales	Standard Sales	17.5%	HMRC VAT	Domestic Sales (Box 1, Box 6)	VAT Item	Yes
EC Purch Goods Standard	EC Purch of Goods Standard	-17.5%	HMRC VAT	EC Purchases of Goods (Box 2, Box 9)	VAT Item	No
Reverse Charge Purch Standard	Reverse Charge Purch Standard	-17.5%	HMRC VAT	Reverse Charge (Carousel/MTIC) (Box 1, None)	VAT Item	No

Group Name/Number	Description	VAT items included in group (must be entered in the order shown)	Item/Group	Required for cash accounting?
EC Purch Goods 17.5% Group	EC Purch of Goods Group	Standard Purchases EC Purch Goods Standard	VAT Group	No
Reverse Charge Purch 17.5% Grp	Reverse Charge Purch Group	Standard Purchases Reverse Charge Purch Standard	VAT Group	No

Create new VAT codes

Be sure that any new VAT codes you create are set up properly and that you use the correct one on each transaction. You will need to create new VAT items and VAT groups before setting up the new VAT codes. Please refer to "Create a new VAT item" and "Create a new VAT group" sections for instructions on how to do this.

In QuickBooks 2008:

Go to the Lists menu and click VAT Code List.
Click the VAT Code button at the bottom of the list and then click New.
Enter a code and a description for the tax, for example, Standard (17.5%). In the VAT Code field, enter up to 3 characters that you will recognise on a form, such as an invoice. In the Description field, enter a note to remind yourself of what the code stands for. Refer to the table below for the list of recommended new VAT codes.
Select the Taxable radio button.
Taxable codes represent VAT items or VAT group items. The VAT item contains details about the tax, such as the rate or amount, and links to a single line of the VAT return.
- If you want to track the VAT you pay on business-related purchases, click the VAT Item for Purchases drop-down arrow. Choose the appropriate VAT item (one that links to a return box for tax you paid on your purchases).
- If it doesn't already exist, create the VAT item or VAT group item that this VAT represents.
- Click the VAT Item for Sales drop-down arrow and choose or create the VAT item (one that links to a return box for tax you collected on your sales).
Click OK.

Table of required new VAT codes

VAT code	Description	Taxable or non-taxable	VAT item for purchases	VAT item for sales	Notes	Required for cash accounting?
S	Standard (17.5%)	Taxable	Standard Purchases	Standard Sales	Remember to create these VAT items first	Yes
EGS	EC Goods Standard (17.5%)	Taxable	EC Purch Goods 17.5% Group	EC Sales Goods 0% Group (This should already exist)	Remember to create these EC Purchase items first	No

In QuickBooks 2006:

From the Lists menu, choose VAT Codes List.
From the VAT code menu button, select New.
Fill in the New VAT Code window:
- In the VAT Code field, type a unique letter, number, or two-character combination for this code.
- If you want, enter a description to help you remember what this VAT code is for. For example, Standard (17.5%).
- Type the VAT percentage for this code. For example, 17.5.
Click OK.

Table of required new VAT codes

VAT code	Description	Rate	EC VAT Code	Required for cash accounting?
S	Standard (17.5%)	17.5%	No	Yes
EGS	EC Goods Standard (17.5%)	17.5%	Yes	No

Rename your old Standard Rate VAT code

Go to the Lists menu and click VAT Code List.
Click the VAT Code button at the bottom of the list and then click Edit VAT Code.
In the Description field, enter a name that represents that historical Standard Rate VAT, for example, Temp Standard (15.0%).

Starting 1 January, 2010, use your new Standard Rate VAT code on any new business forms. Historical invoices will not be affected; they will still use the 15.0% VAT rate.

Update default VAT code in the VAT Preferences section (if needed)

Go to the Edit menu and click Preferences.
In the Preferences window, click VAT in the list on the left.
Click the Company Preferences tab.
Select the default VAT code (your new 17.5% VAT code).
Click OK.

Update customer VAT codes (if needed)

In QuickBooks 2008, there are two ways to update your customer VAT codes with the new VAT information. For QuickBooks 2006, use the manual method of updating your customer VAT codes.

Manually update your customer VAT codes

Use this method for QuickBooks 2006.

If you haven't already done so, open the VAT preferences and allow customer VAT codes.
Click Customer Centre to open it, and then click the Customers & Jobs tab on the left side of the window (for QuickBooks 2006, go to the List menu, and then click Customer:Job List).
Double-click the customer name. The Edit Customer window opens.
Click the Additional Info tab.
Click the VAT Code drop-down arrow and choose the new 17.5% Standard Rate VAT code for that customer.
If applicable, enter the customer's VAT Registration Number in the VAT Registration Number field.
Click OK.
Repeat steps 3-7 for each customer.

Export customer VAT codes to Excel

Make a backup of your company file.
Go to the Customers menu and select Customer Centre.
Select the Excel dropdown button and select Export Customer List.
Select the "a new Excel workbook" radio button, and then click Export. The Excel spreadsheet appears.
In Excel, update the information in the “VAT Code” column with the new VAT codes that you have created in the company file.
Go to the File menu and select Save.
Close the spreadsheet.
In QuickBooks, go to the Customers menu and select Customer Centre.
Select the Excel dropdown button and select Import from Excel.
Browse for the Excel (.xls) that you just saved.
Select a sheet in this Excel workbook.
In the "Choose a mapping" field, add a new mapping.
- Type the name for the mapping.
- Add the following fields
- Job or Customer Name = Customer
- VAT Code = VAT Code
In the Mappings window, click Save.
Click Import

Update supplier VAT codes (if needed)

In QuickBooks 2008, there are two ways to update your supplier VAT codes with the new VAT information. For QuickBooks 2006, use the manual method of updating your supplier VAT codes.

Manually update your supplier VAT codes

Use this method for QuickBooks 2006.

If you haven't already done so, open the VAT preferences and select Use Supplier VAT Codes.
- Go to the Edit menu and click Preferences.
- In the Preferences window, click VAT in the list on the left.
- Click the Company Preferences tab.
Click Supplier Centre to open it, and then click the Suppliers tab on the left side of the window.
Double-click the supplier name. The Edit Supplier window opens.
Click the Additional Info tab.
In the VAT Information section of the window, click the VAT Code drop-down arrow and choose the 17.5 % Standard Rate VAT code for that supplier.
If applicable, enter the supplier's VAT Registration Number in the VAT Registration No. field.
Click OK.
Repeat steps 3-7 for each supplier.

Export supplier VAT codes to Excel

Make a backup of your company file.
Go to the Suppliers menu and select Supplier Centre.
Select the Excel dropdown button and select Export Supplier List.
Select the "a new Excel workbook" radio button, and then click Export. The Excel spreadsheet appears.
In Excel, update the information in the “VAT Code” column with the new VAT codes that you have created in the company file.
Go to the File menu and select Save.
Close the spreadsheet.
In QuickBooks, go to the Suppliers menu and select Supplier Centre.
Select the Excel dropdown button and select Import from Excel.
Browse for the Excel (.xls) that you just saved.
Select a sheet in this Excel workbook.
In the "Choose a mapping" field, add a new mapping.
- Type the name for the mapping.
- Add the following fields
- Name = Supplier
- VAT Code = VAT Code
In the Mappings window, click Save.
Click Import.
In the Duplicate Record Found window, select Replace existing data with import data, ignoring blank fields, and then click Apply to All.
Save the log file that is generated.
Confirm the supplier VAT codes have been changed and nothing else.

Update items

In QuickBooks 2008, there are two ways to update your item information. For QuickBooks 2006, use the manual method of updating your item information.

Manually update your items

Go to the Lists menu and click Item List.
Select the item that you want to change.
Click Item at the bottom of the list and then click Edit Item. The Edit Item window appears.
Select your new 17.5% VAT code.
Click OK.
Repeat steps 2-5 for all your items.

Export your items to Excel

Make a backup of your company file.
Go to the Lists menu and select Item List.
Select the Excel dropdown button and select Export All Items.
Select the "a new Excel workbook" radio button, and then click Export. The Excel spreadsheet appears.
In Excel, update the information in the “VAT Code” column and "VAT Code for Purchases" with the new VAT codes that you have created in the company file.
Go to the File menu and select Save.
Close the spreadsheet.
In QuickBooks, go to the Items menu and select Item List.
Select the Excel dropdown button and select Import Items.
Browse for the Excel (.xls) that you just saved.
Select a sheet in this Excel workbook.
In the "Choose a mapping" field, add a new mapping.
- Type the name for the mapping.
- Add the following fields:
- Type = Type
- Name = Item
- VAT Code = VAT Code
- VAT Code for Purchases = VAT Code for Purchases
In the Mappings window, click Save.
Click Import.
In the Duplicate Record Found window, select Replace existing data with import data, ignoring blank fields, and then click Apply to All.
Save the log file that is generated.
Confirm the items have been updated with the new VAT codes and nothing else has changed.

Update accounts

In QuickBooks 2008, there are two ways to update your account information. For QuickBooks 2006, use the manual method of updating your account information.

Manually update your account information

Go to the Lists menu and click Chart of Accounts.
Select the account that you want to change.
Click Account at the bottom of the list and then click Edit Account. The Edit Account window appears.
Select your new 17.5% VAT code.
Click OK.
Repeat steps 2-5 for all your accounts.

Export your account information to Excel

Make a backup of your company file.
Go to the Reports menu, select List, and then select Account Listing.
Click Modify Report.
On the Display tab, click VAT Code in the Columns list, and then click OK.
Click Export.
Select the "a new Excel workbook" radio button, and then click Export. The Excel spreadsheet appears.
In Excel, update the information in the “VAT Code” column with the new VAT codes that you have created in the company file.
Go to the File menu and select Save.
Close the spreadsheet.
In QuickBooks, go to the File menu and select Utilities.
Browse for the Excel (.xls) that you just saved.
Select a sheet in this Excel workbook.
In the "Choose a mapping" field, add a new mapping.
- Type the name for the mapping.
- Add the following fields:
- Type = Type
- Name = Account
- VAT Code = VAT Code
In the Mappings window, click Save.
Click Import.
In the Duplicate Record Found window, select Replace existing data with import data, ignoring blank fields, and then click Apply to All.
Save the log file that is generated.
Confirm the account VAT codes have been updated with the new VAT codes and nothing else has changed.

Update memorised transactions

Go to the Lists menu and click Memorised Transaction List.
Double-click the memorised transaction you want to edit.
Edit the transaction as needed.
Rememorise the transaction by choosing Memorise from the Edit menu.
When asked whether you want to replace the memorised transaction, click Replace.
If you are only entering the transaction information for future use, close the transaction window by clicking the Clear button and then clicking the close box at the top of the window.

Progress invoices and other business forms

If you have started progress invoicing on an estimate with the old temporary Standard Rate VAT of 15% and will finish with the new Standard Rate VAT of 17.5%, the estimate may have an amount outstanding if 100% of the invoice items have been invoiced.

Edit the original estimate and reduce it to show the amount that has been invoiced prior to January 1, 2010.
Add a change order for this estimate.
Create a new estimate for the remaining amount to be invoiced with the new percentage.

If you have already completed invoicing for the full amount at two different percentages, you can edit the original estimate and remove the checkmark in the Estimate Active box.

Purchase orders and sales orders that have been created with 15% will have to be verified when put into item receipts, bills, or invoices to ensure the correct VAT rate is charged dependent on the tax point. For more details regarding the Standard Rate VAT changes, visit the HMRC Web site.