As you may already be aware the VAT rate will increase from 17.5%  to 20% from January 4 (2011).

For many business owners this will be a real pain in the backside from an accounting perspective. Luckily, for our customers they won’t have to do a thing because the VAT change will be automatically calculated when they electronically draw up their invoices.

The people who will suffer are those who do their accounts on paper-based spreadsheets or via electronic systems which lack the automative technology as built by Crunch. Accountancy Age recently reported:

“Having manual records means businesses will spend more time on billing and re-pricing their goods in their accounting ledgers – or pay for an accountant to do it.

Another burden for businesses is the extra work needed to make sure that the first VAT return submitted after the rate change is accurate.”

For our customers there will be no burden, in fact, even our accountants can put their feet up and let the technology do the number crunching – you’ll just get a message on your dashboard informing you that the rate change has been taken care of.

Nonetheless, here’s more information on how the rate change will work in practice:

* Invoices you send on January 4 and after must have VAT added at 20%.

* If you provided a service before January 4 but are sending the invoice after the VAT rate change then you have a choice. You can either decide to add the VAT at 17.5% or use the new rate. Whatever’s best for you.

* If the situation happens to be the exact opposite, i.e. you’re being paid or sending invoices before January 4 for work that is being done afterwards, then VAT will usually remain at 17.5%.

* HMRC states that if you offer a continuous supply of services, such as leasing photocopiers, you should… “account for the VAT due whenever you issue a VAT invoice or receive payment, whichever is the earlier.” So, you must charge 20% on invoices you issue and payments received on or after January 4.

And that’s just about it; for any specific questions regarding VAT our team of expert accountants are always happy to help!