VAT Rate Increase January 2011 - Why Different From Last Time?

It is tempting to think that the VAT rate increase this coming January is just a repeat of the rate increase this last January. It isn't:

• The new standard VAT rate will apply from 4th January 2011 (the Tuesday after the Bank Holiday). For many B2B (Business-to-Business) companies this will mean the first day of a new accounting period, but for retailers, etailers and some B2B it will be part way through a period.

•  On the commercial side, the last increase was a reversal of a previous decrease. This time it is a real increase, and new approaches will be needed for pricing etc

• On the systems side, software vendors will have chance to put better solutions in place than when a few days' notice was given in 2008. This may mean software upgrades and/or changes to their advice. Last time, many vendors didn't have specific functionality and/or automation for aspects such as credit notes and un-despatched orders. Hopefully they will this time.

• In any case, any business that has changed their systems in any way during 2010 will need to look afresh at the rate change issues.

The key is to make the most of the rate change, by addressing the commercial and systems issues positively. Here are some ideas.

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