Amanda Stansfield is founder of Granny Gothards, a manufacturer and distributor of artisan ice cream in the UK and around the world. Since being founded on…
Throughout the pandemic the government introduced a reduced 5% VAT rate for sales made (or purchases from) the hospitality, holiday accommodation and attractions industry until 30th September 2021 to help the industry recover. From 1 October 2021 the new reduced tax rate will be 12.5% until 31 March 2022.
WHAT DO I NEED TO DO?
- Update your ePos or booking system settings to ensure the new VAT rate is applied to the correct products and services, so you’re charging your customers the correct prices.
- Update your accounting software settings. Below we summarise how to setup the new tax rate in your accounting software for Xero, QBO and Sage 50.
- Update the link between the two:
- ePos integrations with Xero/QBO/Sage – login to your ePos, find the settings area for the integration with your accounting software, and make sure applicable sales type is mapped to the new 12.5% VAT rate from the accounting software, and click save.
- Manual entry of daily takings – when you next input the sales data into your accounting software, ensure you select the new 12.5% VAT rate where applicable.
- Cash code from the bank – ensure you select the 12.5% VAT rate before reconciling the transactions, and remember to update any bank rules.
As a side note, if you’re VAT registered there must be digital links between your sales data and your VAT return submissions to comply with Making Tax Digital for VAT, so if you’re manually entering this data be sure there’s a reasonable technical reason why there’s no digital link, or contact your account manager at Francis Clark who can discuss options to ensure there are digital links to comply with MTDfV. MTDfV applies to ALL VAT registered businesses from April 2022, but it was enforced in 2019 for those with over £85k turnover.
HOW DO I SET UP 12.5% VAT RATE IN XERO?
- In your Xero account, go to Accounting then Advanced
- Click on Tax Rates
- Click New Tax Rate
- Enter the Tax Rate Display Name as ’12.5% (VAT on Income)’
- Make sure the Tax Type is set to ‘Sales’
- Change the Tax Component from 0% to 12.5%
- Click Save
If you purchase from the hospitality sector, please also set up a new tax rate with the display name ’12.5% (VAT on Expenses), with the tax type ‘Purchases’ and a tax component of 12.5% then click save.
HOW DO I USE 12.5% VAT RATE IN QUICKBOOKS ONLINE?
Quickbooks has created their own article on this here. In summary, turn on the 12.5% VAT rate by:
- Click Taxes on the left hand menu inside QBO
- Select Edit VAT, then Edit Rates
- Click the gear icon, then Include Inactive
- Find the 12.5% VAT rate and turn the toggle to On, which will turn it green
HOW DO I USE 12.5% VAT RATE IN SAGE 50?
- Click Settings from the top menu bar
- Click Configuration
- Click the Tax Codes tab
- Select a code not being used, for example, T50
- Click edit
- Amend the Rate to 12.5% and enter the description 12.5% VAT Rate
- Click ok
- Click apply
- Click close and begin using T50 for the 12.5% VAT rate where appropriate.
For other questions, read the blog from our VAT team here or contact your Account Manager at Francis Clark.