VAT rate change
The reduction to the standard VAT rate of to 21% is due to finish on 28th February 2021.
From 1st March 2021, the standard VAT rate will revert back to 23%.
We will automatically update your Accounting service with the new rate.
- Continue to process transactions dated up to the end of February as normal.
- We advise you not to enter any transactions dated in March until we have updated your service with the new rate.
- Any recurring invoices, payments and receipts when processed will automatically use the new rate.
Processing transactions in March
We will automatically update your VAT rate. Any transactions dated on or after 1st March 2021 that use the Standard VAT rate will be charged at 23%.
What do I need to check
The following scenarios only apply when using the Standard VAT rate.
|Area||Why is this area affected?||When do I need to make changes?|
Credit notes dated after 1 March will automatically use the new 23 % VAT rate.
If you are crediting an invoice that was created before 1 March, the credit note will need to use the previous 21% VAT rate.
To accommodate this, we have added a new field to the credit note for the Original Invoice Date. If this date is before 1 March, the 21% VAT rate is applied.
|Credit notes dated on or after 1 March that apply to pre 1 March invoices.|
|Importing Quick Entries||
If you import your quick entries using a template spreadsheet, any transactions using the Standard VAT rate will need to be adjusted in your import file.
|Before you first import quick entries from 1 March.|
|Bank feeds and bank statement imports||
When importing other payments and receipts, the 23% VAT rate will automatically be applied to transactions with bank statement date that falls on or after 1 March.
If the actual transaction was processed before 1 March the higher 21% VAT rate will apply.
When this happens, you'll need to disregard the transaction and enter it manually.
|The first time you import transactions from a bank feed or bank statement from 1 March.|
|Converting quotes, proformas, drafts and estimates to invoices||
Quotes, estimates and draft invoices using the standard VAT rate that are converted to invoices after 1 March will be recalculated using the 23% VAT rate.
|Early payments||Payments dated before the rate change that are made for an invoice dated after the rate change may need to be adjusted or partially refunded.|
If you have already created transactions using the standard VAT rate, that are dated after 1 March, the VAT rate may have been calculated at the wrong rate.
You will need to amend these transactions to ensure the 23% VAT rate is used.
|If the transaction is correctly dated, you can amend it at any time.|
|VAT inclusive prices||If you have set a VAT inclusive price on a product or service, the total price of the product will remain the same, but the Net and VAT amounts will be recalculated when the product or service is added to an invoice after 1 March.|
|Recurring sales invoices||
For invoices that do not include VAT inclusive items, you don't need to do anything.
The 23% rate will be used when the invoices are created from 1 March 2021 and the template will be updated with the new values.
If you have recurring invoices that contain VAT inclusive items these will be paused on 1 March. You can then choose whether you edit the Net and VAT value of the items before changing the transaction status.
|For invoices that contain VAT inclusive items, edit these from 1 March.|
|Recurring payments and receipts||
When processed in March, the recurring payments and receipts will use the new VAT rate.
If you have recurring bank payments or receipts and the overall value of the recurring items is changing, you need to stop the old recurring payment or receipt and create a new one.
|Before you first process recurring payments and receipts dated from 1 March.|
Crediting an invoice with the old VAT rate
If have an invoice dated before 1 March and you need to credit this invoice after 1 March, the credit note will need to be dated in March but use the same VAT rate as the invoice.
To accommodate this, we have added a new Original Invoice Date option to the Credit Note screens.
When you have a credit note dated in March that credits an invoice dated in February, enter the date of the original invoice in the new field. The VAT rate is then calculated using the invoice date.
- You have an invoice dated 15/02 for €100 with 21% VAT, making a total of €121.
- On 03/03, you realise you need to credit off that invoice.
- Enter an credit note dated 03/03, the standard VAT rate is automatically set to 23%.
- In the Original Invoice Date, enter 15/02, the standard VAT rate is now adjusted to 21%, matching the original invoice. If you create the credit note directly from the invoice, this will be set automatically for you.
Importing quick entries
If you use a template spreadsheet to import information using Quick Entry Import, you need to adjust the VAT amount and total Amount
Any transactions using the Standard VAT rate will need to be adjusted in your import file.
Sales and Purchase Quick Entry Import
In the import spreadsheet, check the information is updated to reflect the 23% VAT rate in the following fields where applicable.
|I||VAT Rate||Alphabetic text||Find all transactions that use Standard Rate.|
Adjust the VAT value of the transaction.
For example, change the VAT from €21 to €23.
Adjust to the total value of the transaction.
For example, change the total from €121 to €123.
Quotes, estimates and draft invoices
Quotes, estimates and draft invoices created before 1 March, and converted to an invoice after 1 March will calculate VAT at the 23% rate. You may need to make your customers aware that their final invoice may have a different value.
If your quote includes an item with a VAT inclusive price, the total price will be maintained as it's VAT inclusive. The Net / VAT split is recalculated.
If you've already created transactions dated in March or beyond, these will use the old VAT rate.
You'll need to update these transactions to ensure they use the new VAT rate.
To do this, simply edit and re-save these transactions to update the VAT to new rate.
If the transaction is already paid, unallocate the payment first.
Payments dated before the rate change that are made for an invoice dated after the rate change may need to be adjusted or partially refunded.
This may occur if you have been paid in advance for work prior to the VAT rate change, which is not completed and invoiced until after March.
If the customer paid for all the work in advance, they would have underpaid the VAT and need to pay extra.
For example, on 20 February you issue a quote a customer for building work for €5,000 plus VAT to be carried out in March and the customer pays the full value in advance.
|Date||Transaction type||Total||VAT rate|
|27 February||Full payment in advance||€6,050|
Bank Feeds and Statement Import
When importing transactions from a bank feed or bank statement import, check that the VAT rate used for Other Payments and Other Receipts is correct.
When transactions are imported, the transaction date in Accounting will be the same as the date the transaction cleared your bank account. In reality, the actual transaction was probably a few days earlier. When the difference in dates goes across the period where the VAT rate changes, the imported transaction may use an incorrect VAT rate.
For example, on 28 February you bought some office supplies for €100 plus 21% VAT. You paid for this using your debit card. The transaction cleared your bank account on 2 March. When you import the transaction via a bank feed or bank statement import, the date used is 2 March and the VAT rate applied is 23%, making the net and VAT amounts incorrect.
To correct this, you'll nee to discard the transaction and enter it manually.
Cash Accounting Scheme
If you use the Cash Accounting Scheme, the VAT rate is still calculated based on the invoice date, not the date of payment.
VAT inclusive prices
If you've quoted customers for items that are VAT inclusive, you may need to change the date of the quote to recalculate the total price of the VAT inclusive items.
For quotes being converted, the overall VAT inclusive price does not change when the VAT rate changes. Instead, the Net and VAT values are adjusted.
For example a VAT inclusive item that uses Standard VAT:
|VAT inclusive price in February at 21% VAT||Net||VAT|
|VAT inclusive price in March at 21% VAT|
If you're happy to charge the same overall amount, you don't need to change anything.
If you want to pass the VAT reduction on to your customers, you need to update the VAT inclusive price on the product record then delete the item from the invoice and re-enter it.
Recording new invoices
To ensure the Net and VAT amounts of your VAT inclusive items is correct when creating new invoices, you must set the date of the invoice before adding the VAT inclusive items.
If you change the date after adding the items, the VAT rate is recalculated based on the new date you select. The Net amount is not recalculated.
Note: This only affects your transactions if the dates you are changing between have different VAT rates.
Recurring payments and receipts
When you record a bank payment or receipt, you record the overall value rather than the Net and VAT amounts separately.
If you have set up recurring bank payments or receipts before the rate change, the value of the transaction is not affected by the VAT rate change. Instead, the Net and VAT amounts are adjusted.
For example a recurring bank payment would look like this:
|Payment in February at 21% VAT||Net||VAT|
|Payment in March at 23% VAT|
If your overall payment or receipt amount isn't changing, you don't need to do anything.
If your overall payment or receipt amount has changed to reflect the VAT rate change, you need to cancel the recurring transaction after the last transaction has been created at the 21% rate, then recreate the recurring transaction at the new rate.