Keep Your Head Above Water as VAT Rises
It's not high on anyone's list of most interesting things, but the rise in VAT on 1 January is something all companies must take seriously. It might be tempting to think that if you aren't in retail, it's not a big issue, but unless you don't purchase supplies or charge people money, chances are it will have an impact on your business in some way.
According to Kevin Hart, the man at business software specialist Sage in charge of government relations, there are around two million VAT registered companies, and a recent poll conducted by Sage, of over 2,000 customers, found one in eight of them were not aware of the impending rise in VAT.
Not only will the rise in VAT itself cause disruption, but for many companies, principally retail and hospitality, the change comes at the busiest time of year, when staff are concentrating on pulling revenues.
If your company isn't in retail or hospitality, chances are it will be winding down for the holiday and short-staffed, so complying with the VAT change could become a challenge for other areas too.
On top of this is a number of other changes, which may or may not affect you. For instance, the car scrappage scheme closes, so any company related to the motor industry is likely to suffer multiple hiccups over the new year.
If you export services to countries in the EU, you will also have to comply with EC sales listing for the first time in 2010. So, there is the compound compliance workload to consider and it's vital that you start managing the switch early.
Here's a few tips from Sage on how to cope:
- Plan early for the change - don't leave it until after Christmas. Make sure enough of your staff are on hand to process the change.
- Consult with your accountant early on to understand how the VAT change will impact the way you handle transactions - they may be busy with clients' self-assessment returns towards the end of the year.
- Pay particular attention to any revenues or costs that have been quoted in 2009, but won't be paid until after the New Year. Make sure automatically recurring transactions are updated.
- Explore whether there are any special dispensations for your business to help you manage the change. Retailers, Hospitality and Telecommunications companies do not need to make the change until after 1 January, rather than on the day. Retailers also may well also have the two week's grace to re-price stock at the shelf extended to four.
- Don't forget to check that your suppliers or sales channel is doing the necessary work to cope with the changes themselves.
- Check out the advice document published by HMRC to help you manage the change as smoothely as possible.