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Sage 200 Standard / Sage for Education - Temporary reduced VAT rate for hospitality, holiday accommodation and attractions in the UK

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Summary

The government announced on 8 July 2020 that it intended to legislate to apply a temporary 5% reduced rate of VAT to certain supplies relating to hospitality, hotel and holiday accommodation and admission to certain attractions. The reduced rate was initially introduced to last for a temporary period between 15 July 2020 and 12 January 2021. This period was subsequently extended to 30 September 2021. From 01 October 2021, the rate will be increased to 12.5% for 6 months, ending on 31 March 2022. The scope of the relief will remain unchanged

Process

NOTE:

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.

 

During this period you will need to ensure that you raise & record invoices correctly, depending on the classification of the goods/ services.

You can see which items are impacted by the change here.

Specific government instructions around the VAT rate changes and what it means for day-to-day processing can be found here.

Unless already enabled, Sage 200 Standard/Education will need a lower rate VAT code of 12.5%.

TIP: If you already have a reduced rate of VAT and wish to report on items temporarily impacted by the VAT change you can create a separate VAT code to help you keep track. 

Important Information:

Additional Companies

Should you set up additional data sets within your product you will need to ensure that the database is set up to include the reduced rate of VAT. 

How to check if you have a reduced rate of VAT enabled

You will need to do the following:

  • Open Settings > Organisational and Financial > VAT Rates.
  • Review the list of rates for one set to 12.5% for the lower rate. 

If you don't already have a lower rate, see below.

How to set up a VAT rate for the reduced rate

  • Open Settings > Organisational and Financial > VAT Rates
  • Click Add and enter in detail including.
Code An available VAT Code number
Name This can be anything which is meaningful to your business
VAT return This must be ticked
% Set to 12.5%
Input Code Optional depending on your business setup
Output Code Optional depending on your business setup
  • Click OK.
Further Considerations

VAT Return reconciliation
As part of this process if you identify an invoice where information has been recorded incorrectly, it is advisable to carry out a full error correction rather than amend values on the VAT return. For assistance with error corrections in the software please see the help file here.

Accounting for supplies that straddle the temporary reduced rate
In most cases, you will simply account for VAT at 5% for supplies made between 15 July 2020 and 30 September 2021 and 12.5% between 1 October 2021 and 31 March 2022. They may however, there may be situations where you receive payments or issue invoices before 30 September 2021 for supplies that take place on or after 30 September 2021.
More information about this can be found in sections 30.7.4 to 30.9.2 of VAT notice 700.

Default Customer/ Supplier rates 
You may need to review any Customer or Supplier default VAT codes, where you solely engage with them for items connected with the reduced VAT rate.

How to change the default VAT code

  • For Customer records navigate to Customers > Create & Amend Accounts > Amend Customer Details > select an account > Trading tab.
    The Default VAT code can then be altered using the dropdown box.
    Click Save after making the change.

  • For Suppliers - Suppliers > Create & Amend Accounts > Amend Supplier Details > select an account > Trading tab.
    The Default VAT code can then be altered using the dropdown box.
    Click Save after making the change.

Alternatively, you can prepare an import to change several records at once, further information on how to prepare this import can be found here:

Customer Account Import
Supplier Account Import

TIP:

If you retain the import file you can use it to reverse when needed by simply changing the VAT Code.

 

CAUTION:

Keep a list of any changes you make in the product as they will need to be changed at the end of the period approximately 6 months.

 

Do you operate under the Tour Operators Margin scheme?
Specific changes may be required to the way you process, further advice can be found in the VAT notice 709/5 available here.

Where can I find further information about these changes?
The government has published a policy paper available here.