Reduced VAT Rate
by Nicola Mullen
 
 

Under the new July stimulus package issued by the Government to provide aid to businesses during this current pandemic, there have been changes made in relation to the standard rate of VAT.

 

From 1st September 2020, the standard rate of VAT has been reduced from 23% to 21% for 6 months ending on the 28th February 2021 for all businesses.

 

The government have made the decision to allow the retailer decide as to whether they will pass this VAT cut onto their customers. The VAT rate of 21% still needs to be charged on all sales but it is your decision as to whether you reduce the gross and pass the benefit onto your customers or whether the gross remains the same as per pre 1st September 2020 and the company uses this reduction to support the additional operating and staff costs caused by the Covid pandemic.

 

Please ensure any invoices/till receipts issued by the company dated from the 1st of September 2020 have the new VAT rate applied, unless an invoice is being issued for money received prior to 1st September 2020 in which case, the respective VAT rate would be 23%.

 

We suggest a new VAT code to be added to your accounts package for this new reduced VAT rate of 21% for both sales and purchases (Resale & Non-resale) to make the changeover more efficient and less cause for errors. Please note that in previous years 21% was the standard VAT rate so you may have these codes already set up on your accounts package.

 

Also, please be aware that if you prepare your VAT return on a cash receipts basis, it is important to note that if an invoice was issued pre 1st September 2020 but it was paid post 1st September 2020, you need to apply 23% in your VAT return as this was the respective rate at which the date the invoice was billed.

 

Regards

 

Nicola