Is your business ready for the VAT switch?

Just when we’ve all grown accustomed to the lower 15% VAT, it’s going up again. On 1 January 2010, VAT will revert to 17.5%. It was last December that Chancellor Alistair Darling cut VAT by 2.5% in a bid to encourage consumer spending and boost the economy – but the reduced rate is only valid for a few more weeks.

With VAT set to switch back to 17.5% at the start of the new year and the holidays fast approaching, how prepared is your business to make the change? Avoid an administrative nightmare by planning for the change now with this practical checklist:

• Talk to your accountant. This will help ensure that you understand the rules and how the VAT change will impact on your business and its transactions.

• Inform your customers. Let your customers and clients know that the VAT change is happening as this will help avoid misunderstandings and confusions.

• Try to close invoices and due items by the end of the year. This will make the transition easier on the books because certain transactions made before and after 1 January may have different VAT applied to them.

• Make sure your business software is ready for the change. Ensuring that invoices, billing, credit notes and other documents use the correct VAT percentage immediately on 1 January will save a lot of headaches.

• Don’t leave the preparations until the end of December. With Christmas just around the corner, disruptions in the workplace are inevitable. Staff shortages and closed offices could end up causing unneeded stress.

For more information, visit http://www.hmrc.gov.uk/vat/forms-rates/rates/rate-changes.htm.

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