Summary
Resolution
About the changes
Transactions, where you have been using the 12.5% rate, will now be at the Std rate of 20%. VAT.
For detailed information about what's included, see the Government support page on VAT-reduced rates for hospitality, holiday accommodation and attractions.
What do I need to check?
Here is a list of all the different areas and transactions that you may need to update. If you think an area applies to your business, select below for more information.
Categories: Update any categories that use a default VAT rate of Lower Rate 2 12.5% to Standard 20%.
Recurring payments and receipts: If you have set up recurring Payments or Receipts that use the 12.5% rate, you must change them before they next recur on, or after, the 1st of April 2022.
Bank feeds and bank statement imports: Update your bank rules and make sure any bank transactions from bank feeds or bank statement imports that relate to hospitality, holiday accommodation and attractions, use the Standard 20% rate. Do this the first time you import transactions from a bank feed or bank statement after the 1st of April 2022.
Copying invoices and credit notes: If you have copied existing transactions that use the 12.5% rate, change the VAT rate applied before saving the invoice.
Flat Rate VAT: If you use Flat Rate VAT, the percentages you apply may change part-way through the VAT period. Check for any changes when you calculate VAT payments after the rate change.
Future-dated transactions: Check for transactions dated after the 1st of April 2022 that use the 12.5% rate and update them to use the 20% VAT rate.
Categories
This may affect you if you previously changed the default VAT rate to the Lower rate 2 12.5% on any ledger accounts that relate to hospitality, holiday accommodation and attractions.
Each category holds a default VAT rate to save you from having to select the correct rate each time you use it.
If you have already changed the default VAT rate to the Lower Rate 2 12.5% on any categories, change these back to the Standard 20%.
When to make these changes
Make these changes once you start processing new transactions dated from the 1st of April 2022 onwards.
Find out what VAT rates are set on ledger accounts
The VAT rate set on each category is shown on the Chart of Accounts list.
Use any previously exported chart of accounts list to trace the categories that need to be updated, or export your chart of accounts list to find all the categories using the Lower rate 2.
- Select More, then Business Settings, then Chart of Accounts.
- From the New Category drop-down, select Export Accounts.
- Once exported, download the file from the file icon.
Change the VAT rate on a category
- Select More, then Business Settings, then Chart of Accounts.
- Use the search to find the category to change.
- Select the required category.
- Choose Standard from the VAT Rate drop-down.
Recurring payments and receipts
If you have set up recurring Payments or Receipts which relate to hospitality, holiday accommodation and attractions, you must change them before they next recur on, or after, the 1st of April 2022.
You cannot change the value of a recurring payment or receipt, so you must:
- Stop the recurrence on the last recurring entry before the rate change
- Set up a new one with the standard VAT rate to start on the first recurrence date on or after the 1st of April 2022, then make that transaction recurring
Locate your recurring entries
- From Banking, open the Bank Account you want to view.
Change the From date to a date before the oldest current recurring entry occurred.
For example, you have a recurring entry every 3 months. If the next entry is the 15th of April, set the From date to the 15th of January or before.
- Change the To date to today.
- You will see
in the Recurrence column. This is the last recurrence in a sequence.
Cancel the Recurrence
- Click the transaction to open the details.
- Go to Edit Recurring.
- Select Stop Repeat.
The recurring icon will no longer appear next to the transaction.
You will now need to set up a new recurring entry with the correct VAT rate of 20% and then make it a recurring transaction.
When bank transactions are imported, either via a bank feed or a bank statement, the VAT rate used on similar transactions is memorised automatically.
Similarly, when you create a bank rule, the VAT rate applied to import a bank transaction is set on the rule.
If you're in the hospitality industry, the VAT rate applied to some items may change from the 1st of April 2022, so you'll need to make sure you manually select the correct VAT rate on applicable transactions and edit any affected bank rules.
What do I need to do?
When importing transactions from a bank feed or bank statement, make sure you check and select the correct VAT rate before creating a new transaction.
If you're using bank rules, edit the rule and change the VAT rate.
TIP: We recommend you manually check transactions relating to hospitality, holiday accommodation and attractions around the 1st of April 2022 to check the default VAT rate you have set up is appropriate for the transaction.
Edit a bank rule
- From the incoming bank transactions list, select Rules Management.
- Select the rule to change.
- Change the VAT Rate or ledger account.
If you've entered a transaction that's dated after the 1st of April 2022, and it relates to hospitality, holiday accommodation and attractions, you may need to change the VAT rate to Standard 20%.
The quickest way to see future-dated transactions is to run the Category Activity report.
- From Reports, select More.
- Select Category Activity.
- For the Period choose Custom.
- Change the From date to 01/04/2022.
- Change the To date to 31/03/2023.
Click Calculate.
TIP: If you have no values in the Total Debits this period and Total Credits this period columns then you have no future dated transactions. - Select Export Detailed.
- Confirm you want to Export All Accounts.
- To save or print the report, from the Export menu, and then select CSV or PDF.
The report is ready when a notification displays on the main navigation bar, to the left of Profile. Select the notification bell to open the report.
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.
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