SME’s urged firms to prepare for January VAT rise
The Forum of Private Business is warning firms that the January VAT rise could leave them with a new year headache if they fail to prepare properly. All VAT registered traders will be affected by the increase, which will see VAT rise from its current 17.5% rate to 20% at midnight on 4 January. In theory, the change is relatively simple. However, the FPB is warning smaller firms that things can easily get complicated when put into practice.
Forum chief executive Phil Orford said: “The main problems businesses are likely to encounter around the VAT rise will be with their accounting systems. Any outstanding invoices for work which was genuinely carried out before the date can still be processed at 17.5% so most businesses will probably need to create a new standard VAT code at 20%, but retain a code for the old 17.5% rate.
Orford added: “The good news is that HMRC says it will be taking a ‘light touch’ in dealing with errors made in the first VAT return after the change if the error relates to the change of rate. If you do, however, realise you’ve made a mistake, you’ll need to issue a credit note and then a new invoice at the correct rate to put things right.”
www.fpb.org