What's changing?

The temporary UK VAT rate of 12.5% for the hospitality, holiday accommodation and attractions sectors is coming to an end and will revert to the normal standard VAT rate of 20% from 1 April 2022. You can find out more about the changes on GOV.UK >

If your business is affected, it's easy to revert back to the standard VAT rate. Let's walk through it. 

Do I need to create a new tax code?

You probably created a new tax code for the temporary reduced VAT rate when it was introduced. If that's the case, you simply need to:

• From 1 April 2022 stop using the reduced rate tax code and revert back to your original standard rate tax code, for example, T1.
• Check for any recurring, memorised or outstanding items that need to be updated.

Recurring entries - Invoices and Credits

If you use recurring entries, you should update any recurring items that use the temporary 12.5% tax rate and change them to use your standard rate tax code from 1 April 2022.

1. Ensure you have processed your entries up to 31 March 2022.
2. Click Invoices and Credits, Sales Orders or Purchase orders as required.
3. Click New or New Invoice then click Recall.
4. Note the reference of the item you with to change, select it and click Load.
5. Double-click the description of the item you want to amend.
6. Change the tax code to your standard rate tax code, and click OK, then repeat for any other items affected.
7. Click Memorise and enter the reference you noted in step 4.
8. Click Save and click Close.

Recurring entries - Bank transactions

If you use the recurring entry function for bank transactions, you may need to update your recurring payments, receipts or if you use VAT Cash Accounting, payments on account.

1. Ensure you have processed your entries up to 31 March 2022.
2. Click Bank, then click Recurring, select the required item and click Edit.
3. In Posting Amounts, change the Tax code to your standard rate tax code and click OK.
4. Repeat for any other recurring items.

Memorised batch invoices or credits

If you have memorised batch invoices or credits for regular use, you can update these templates if you need to apply your standard rate tax code.

1. Click Customers or Suppliers as required, then click Batch invoice or Batch Credit.
2. Click Recall and make a note of the template name you choose to edit.
3. Amend the tax code to your standard rate tax code and click Memorise.
4. Save the file using the same file name you noted in step 2.

Memorised bank payments or bank receipts

If you have memorised bank payments or bank receipts for regular use, you can update these templates if you need to apply your standard rate tax code.

1. Click Bank, then click Bank payment or Bank receipt as required.
2. Click Recall and make a note of the template you choose to edit.
3. Amend the tax code to your standard rate tax code and click Memorise.
4. Save the file using the same file name you noted in step 2.

Outstanding Orders and Invoices

If you have any outstanding invoices or orders to update on or after 1 April 2022, you may need to edit the tax codes used on these items.

1. Open the required module, for example Invoices and credits or Sales orders
2. Double-click the required item.
3. Double-click the description of the item.
4. Amend the tax code to your standard rate tax code.
5. Click OK, and then click Save.

Customer, Supplier and Product Records

Tax codes are stored in the customer, supplier and product records, if you need to change the tax codes for some or all of your records there are several approaches you can take.

• If only a small number of records are affected, you can manually edit the records, change the tax code and save them again.
• If a larger number of records are affected you can use the Batch changes option - This feature is available in Sage 50 Standard and Professional.
• If you use Sage 50 Accounts Essentials, and you need to amend a large number of records, you can export the records, amend the tax codes and import the records again.

Other considerations

• If you use screen capture software to import transactions into Sage 50 Accounts, you may need to update the rules in that software to reflect the correct VAT rate.
• If  you're likely to create a number of new customer, supplier or product records before April that require a standard rate VAT code, you may want to change the default tax codes that are applied to these records as they are created. You can do this in Settings by editing the relevant defaults option.
• If you have designed any customised VAT reports, you may need to edit the filters to make sure the correct tax codes are included. Read more >

Further information

• If you're unsure if a transaction is vatable, or if you require further advice about VAT compliance, and how to approach this change in your business, we recommend that you contact HMRC or your accountant.
• FAQs
• HMRC Guidance
• Legislation hub

This article provides general rather than specific guidance to assist all of our customers. We always do our best to make sure that the information is correct but as it's general guidance, no guarantees can be made concerning its suitability for your particular needs. The information is valid at the time of publishing and is provided without any warranty of any kind, express or implied. You should take professional advice if you require specific guidance on your individual circumstances, for example to ensure that the results obtained from using our software comply with statutory or regulatory requirements. For VAT, customs and excise and duties enquiries you should call the HM Revenue and Customs (HMRC) National Advice Service Helpline on 0300 200 3700, contact your local HMRC office or visit their website at www.hmrc.gov.uk  In no event will we be liable to you for any direct, indirect, consequential or incidental loss or damage arising out of or in connection with your use of the information provided.