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Operations II – Reduction in Standard VAT Rate to 15%
It was announced on Monday 24 November 2008 that the standard rate of UK VAT will be reduced from 17.5% to 15.0% with effect from Monday 1 December 2008.
A Business Briefing from HMRC states the following: "You should use the new rate for all VAT invoices that you issue on or after 1 December 2008", except for where:
- You provided goods or services more than 14 days before you issued the VAT Invoice. For example, if you issue a VAT invoice on 1 December for goods or services provided before 18 November 2008, or
- You were paid before 1 December 2008
The guidance provided from HMRC relating to this change is based on Time of Supply legislation which is referred to as the '14 day rule'. Under the 14 day rule, if you issue an invoice within 14 days of goods or services being provided, the sale is treated as taking place when the invoice is issued. If the invoice is issued any later, the sale is treated as taking place when the goods or services are provided.
Listed below are a number of examples of how to interpretate the 14 day rule based on this change effective 01 Dec 2008:
| Order Date | Delivery Date | Invoice Date | Required VAT Rate % |
|---|
17/11/2008 | 17/11/2008 | 01/12/2008 | 17.50 |
17/11/2008 | 18/11/2008 | 01/12/2008 | 15.00 |
17/11/2008 | 18/11/2008 | 02/12/2008 | 17.50 |
17/11/2008 | 19/11/2008 | 02/12/2008 | 15.00 |
31/10/2008 | 31/10/2008 | 01/12/2008 | 17.50 |
30/11/2008 | 30/11/2008 | 01/12/2008 | 15.00 |
30/11/2008 | 30/11/2008 | 14/12/2008 | 17.50 |
30/11/2008 | 30/11/2008 | 15/12/2008 | 17.50 |
Listed below are the necessary points you need to implement
- As at 30 November 2008 the customer should invoice all delivered Sales Orders or the supply of services through their usual means of invoicing i.e. Delivery Notes / Sales Order or Fast Track / Delivery Note and Invoice (Combined or Separate) or using the Invoices option.
- As at 30 November 2008 any outstanding credits should be processed.
- On 1 December 2008, create new VAT Codes for the old Standard Home Sales and Standard Home Purchases at a rate of 17.5% with an effective date of 01/01/1993.
- On 1 December 2008, adjust the VAT Code for the old Standard Home Sales and Standard Home Purchases at a rate from 17.5% to 15% with an effective date of 01/12/2008.
If Operations II is linked to Opera II then these changes will need to be made to the Opera II VAT tables.
AT THIS POINT ANY UNINVOICED SALES ORDER TRANSACTIONS ARE POTENTIALLY SUBJECT TO THE 14 DAY RULE AND MANUAL INTERVENTION WILL APPLY
As at 1 December 2008, for any un-invoiced delivery transactions you will need to consider if the 14 day rule applies:
- If the 14 day rule applies you will need to account for any standard rate VAT at the new 15% rate. Having amended the standard VAT Rate to 15% you will see that any new invoices raised will adopt this VAT Rate and the system will automatically calculate the VAT correctly
- If the 14 day rule does not apply then you will need to account for standard rate VAT at the old 17.5% rate:
- If you are using the Invoice option you will therefore need to edit the Invoice / Delivery Details Line: select the Action / Modify Details option, then select the new VAT Code for the 17.5% rate and save every transaction line.
- If you are using the Invoice (Combined or Separate) function from within the Delivery Notes option you will therefore you will need to edit the Sales Order Lines and select the new VAT Code for the 17.5% rate and save every transaction line, prior to using this Delivery / Invoice function. It may be a better option for your customer to consider raising the Delivery Notes separately from the Invoices for this transition period because it may be quicker to modify the VAT rate on the Invoice option as opposed to editing the Sales Orders.
Other Considerations
If your customer uses Sales Order Processing in both Opera II and Operations II you need to consider the advice given in the Opera II – Reduction in Standard VAT Rate to 15% notification. There is a difference in the recommendations between these two products and you will need to consider which method best suits your customer’s needs.
No utilities are required for Operations II.
