How do I apply a temporary reduced rate of VAT?

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Summary

HMRC have introduced a temporary reduction in the rate of VAT for hospitality, holiday accommodation and attractions from 15th July 2020 to 12th January 2021.

The Winter Economy Plan, 24th September 2020, announced the temporary reduction of VAT will be extended until the end of March 2021.

Please refer to the guidance provided by HMRC on this temporary reduction and seek advice from your accountant for guidance on how to apply this to your business. Some useful articles are listed below but please check HMRC's own site for up to date advice.

More Information

Your system holds four possible VAT Rates. Please see How do I edit VAT rates? to ensure {DataPrompt|VAT Rate 4}} is set to '5%'.

When selling goods you may change the VAT Rate to apply to that transaction to use "VAT Rate 4". Please advise staff to amend it when necessary.

You may default the VAT Rate for an entire module, e.g. for the Booking and Hire module, but please be aware that all sales through that module will be at the reduced VAT Rate unless you specify otherwise.

Please remember to reverse this change once the temporary period ends.

  • Go to " Reports & Settings Maintenance Options System Administrator Platinum Settings".
  • Select "Module" - 'Booking and Hire'.
  • Click [Search].
  • Select "Default booking V.A.T. rate" and click [Edit].
  • Select VAT Rate 4 from the drop down then click [OK].
  • Click [Done] and [Accept].

Pricing

Please be aware your Platinum system will typically be set so that VAT is applied at point of invoice. If you wish to charge the same VAT inclusive price as for a VAT rate of '20%', please bear in mind you will need to increase the nett prices on which VAT is calculated.

An item sold at a retail price of £20, including VAT at 20%, has a nett price of £16.667. To charge £20, including VAT at 5%, the nett price needs to be increased to £19.048

.

To apply this temporary change to stock items, please see this article on setting retail prices. We recommend you store the current retail price using a price code so you can easily revert to this price from 13th January 2021.

Other Considerations

  • If you have a custom Report Generator report (i.e. one that had been written for your needs) that calculates the V.A.T. manually, this report may need to be amended to reflect the new rate. The above WILL not update the report. Please Contact your Platinum dealer or our support team on 0116 230 1500 or by using our website support contact page if this is the case.
  • If you have more than one company on your system, (i.e. if there is more than one icon in the Platinum folder or on the Desktop to get you in to LIVE - e.g. not a test/training system) the above changes will have to be done for each company.
  • If you use regular journals, you will need to recalculate V.A.T. amounts on any V.A.T. relevant nominal centres.

See also


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