Are you ready for the VAT increase in January?

We’ve known for a while now that the VAT increase was coming. In fact, we’ll finally come face-to-face with the 2.5% VAT rise on the 4th January. But while you’ve probably been busy planning for Christmas, has your business got its plans in place to cope with the new 20% VAT rate?

Well, if you’ve not given it too much thought so far you’re not alone. We surveyed 1500 of our customers and we found that nearly one in five small businesses are not ready for the increase.

So, what else did our survey find? Well, while 68% of small businesses are anticipating the effect of the VAT rise, a substantial 11% have yet to contemplate the impending changes, and a further 7% have expressed concern about their lack of preparation.

Suzanne Wardingham, our VAT Specialist, has outlined a number of measures that small businesses can take in order to ensure they are best prepared in January:

Getting prepared

We’ve set up a website to help our customers navigate the VAT change and find  details on what the changes mean for our software. http://www.sage.co.uk/legislationchanges

Pass on the costs?

In the past couple of years we’ve already had two changes to the standard rate of VAT, so making the change is not as much of a daunting task as it used to be for some businesses. As before, small businesses will have to decide whether they want to pass the costs on to their customers.

VAT return

As the VAT increase takes place on the 4th January rather than the 1st this time, there will be some businesses that have to complete a VAT return incorporating both standard rates of VAT. Where this is the case, we strongly recommend that the business owners seek advice from either their accountant or HMRC if they are unsure.

Ask your accountant

It’s likely that accountants will be busy with clients’ self-assessment returns towards the end of the year, so consult with them early on to understand how the change will impact day-to-day transactions.

Special dispensations?

Exploring whether there are any special dispensations for your business to help you manage the change more efficiently. Last time retailers received a two-week grace period to re-price stock on the shelves.

Be good to your customers

If possible invoice them before the increase so they will not incur the higher VAT rate and will appreciate the gesture.

Posted in: increase,January,ready