Sage ERP 1000 and Line 500 Temporary Reduced VAT rate for hospitality, holiday accommodation and attractions in the UK

Summary

To help answer any questions you may, we've collated some common queries that you're asking us around the July 2020 UK VAT rate change for hospitality, holiday accommodation and attractions.

Resolution

Disclaimer

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.

NOTE: The information below is based on current Government guidance and Sage expertise. This information is subject to change, we will continue to keep you up to date as more Government's guidance becomes available. You can also find out more at Gov.uk

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

What's changing?

To help businesses in the hospitality, holiday accomodation and attractions sectors, the reduced rate of VAT 5% will apply to:

Supplies of food and non-alcoholic drinks for consumption on premises from restaurants, pubs, bars, cafes and similar premises in the UK.
Supplies of hot takeaway food and hot takeaway non-alcoholic drinks.
Supplies of hotel and holiday accommodation and admission to certain attractions in the UK.

Who's affected by the changes?

These changes affect:

Restaurants, pubs, bars, cafes and similar premises across the UK.
Suppliers of accommodation and attractions in the UK.
VAT registered businesses purchasing from the above suppliers.

If your business makes such supplies there are some simple changes you will need to make in your software to affect the tax rate applied on or after 15 July 2020.

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.

When are the changes happening?

The changes are temporary and will apply from 15 July 2020 to 12 January 2021.

My business is in the hospitality and tourism sector, does this affect both my sales and purchases?

The changes affect any sales you make of the affected goods and services.

If you have suppliers who are also covered by these changes, your purchases from those suppliers may also be affected.

What if I supply goods or services to the hospitality or tourism sector?

If your business doesn't fall under the VAT change as detailed in the guidance, your supplies to businesses in that sector are not affected.

What changes must I make in my Sage ERP 1000 or Line 500 software?

We suggest you create a new tax code to use for the temporary 5% VAT rate. You may also need to update outstanding invoices, credits and orders, plus any recurring items. For help with this, take a look at our step-by-step guides for Sage ERP 1000 and Line 500

Do I have to adjust my July VAT Return?

You shouldn't need to post any VAT Return adjustments provided:

You make the relevant changes detailed in our step-by-step guides linked above and
From 15 July onwards you record relevant sales and purchases with the new tax code.

What if a supplier issued me an invoice with the wrong VAT amount?

For queries about the VAT rate used on purchase invoices you should contact your supplier.

What date do I use to know which VAT rate applies?

The VAT rate to apply to a transaction depends on the tax point, or 'time of supply'. If the tax point is on or after 15 July 2020, the new rate applies.

You can find details of how to determine the tax point of a transaction here.

What if I have a sales invoice that includes sales for before and after 15 July?

You will need to work out the tax point based on the above guidance. If the tax point is the invoice date then apply the tax rate applicable at the invoice date.

What if I issue a sales invoice after 15 July for goods or services supplied before then?

The VAT rate to apply to a transaction depends on the tax point, or 'time of supply'. If the tax point is on or after 15 July 2020, the new rate applies.

You can find details of how to determine the tax point of a transaction on Gov.UK

What if I receive a payment or issue an invoice before 15 July for goods or services supplied on or after then?

When the amount of VAT to be charged on the supply goes down, under special provisions you can charge tax at the new rate on goods supplied or services performed after the date of the change, even though payment has been received or a VAT invoice issued before that date. If you use the special provisions, to correct the original invoice, we recommend you issue a VAT only credit note to reduce the amount owed.

You can find out more about this in sections 30.7.4 to 30.9.2 of HMRC's VAT guide VAT Notice 700.

How do I record sales invoices issued before 15 July but paid on or after 15 July?

If you're on the Standard VAT scheme, the tax point would be prior to 15 July, therefore the original VAT rate applies.

I've posted an invoice with the wrong tax code. How do I correct this?

To correct this, you can correct or reverse the transaction to cancel the incorrect invoice, then raise the invoice again with the correct tax code.

How do I make changes in Sage ERP 1000 and Line 500 now that will make it easier when it reverts in January?

We suggest you create a new tax code to represent the temporary 5% VAT rate. This means in January 2021 you can simply revert to using your normal 20 tax code, T1 by default.

For full details, refer to our guides for Sage ERP 1000 and Line 500.

What if I use GoCardless?

Once you make the relevant changes detailed in our step-by-step guides there are no additional actions needed for GoCardless.

What if I use Invoice Payments?

Once you make the relevant changes detailed in our step-by-step guides, there are no additional actions needed for GoCardless.

What if I use bank feeds rules?

We recommend you review any bank feeds rules you've set up and make any tax code changes if required.

What if I use third party software to integrate with Sage ERP 1000 or Line 500?

We recommend you speak to your third party software provider to find out if any changes are needed.

Does it affect businesses on the Tour Operators Margin Scheme?

You can find updated guidance on how the changes affect the Tour Operators Margin Scheme at Gov.uk

Sage ERP 1000 and Line 500 Temporary Reduced VAT rate for hospitality, holiday accommodation and attractions in the UK - FAQs