The VAT rate change on 4 January 2011

On the 4th of January 2011, the standard rate of VAT will change from 17.5% to 20% in the UK.

In addition to the existing rates, the 20% rate will shortly be available for invoices, recurring invoices, credit notes and bank transactions.

Please check the HMRC website (http://www.hmrc.gov.uk/vat/forms-rates/rates/rate-increase.htm) for specific information on how to manage invoices raised after 4 January 2011 relating to sales/services provided prior to this date. The HMRC also explains how to manage VAT on sales/services provided before and afer this date that are billed on a single invoice.

If you are registered on the Flat Rate Scheme, then you will need to create a new VAT Status before you start entering data. More information on the new VAT thresholds are available on the HMRC website: http://www.hmrc.gov.uk/vat/start/schemes/flat-rate.htm#2.

We will automatically make the following changes at midnight on the 3rd of January 2011:

• All Recurring Invoice items with a vat rate of 17.5% will be changed to 20%.
• All Chart of Accounts items with a default vat rate of 17.5% will be changed to 20%. For invoices dated prior to 4 january 2011, please check that you are using the correct VAT rate, as the default will show 20% and you may need to use the 17.5% rate.
• All Bank Import Rules with a vat rate of 17.5% will be changed to 20%.
• All Price List items with a vat rate of 17.5% will be changed to 20%.

You can, of course, change any of the above items yourself prior to the 4th of January if you wish.