A leading accountancy firm warns that Cumbrian businesses must take measures to prepare for the end of coronavirus VAT rate relief.
Hospitality businesses have benefitted from a temporarily reduced five per cent rate of VAT since July 2020.
However, from October 1 this will be replaced by a new interim rate of 12.5 per cent, returning to the standard 20 per cent rate from April next year.
Matthew Welsh, a VAT specialist at Workington-based robinson+co, said there were a number of measures businesses need to consider preparing for the change at the end of this month.
“It’s important that businesses plan ahead to minimise impact on business operations,” he said.
“Businesses that use accounting software packages will have to create a new VAT code on the system.
“This wasn’t an issue we found with the five per cent reduction as this VAT rate already existed for other supplies, however, 12.5 per cent is a completely new rate.”
Matthew says it’s not yet clear whether Sage, one of the most commonly used systems, will provide an update to the software packages to facilitate this or whether new VAT codes will need to be created manually on a bespoke basis.
“If a firm uses end of point sale systems or tills, they will need to consider if any steps need to be taken to add the new rate of VAT to the till system so that it is correctly calculated,” he said.
“If you are passing the VAT increase onto the customer you will need to update prices on websites, social media, and menus. If you have been effectively keeping the saving in VAT since July 2020 you will see a decrease in net sales.”