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The increase in the standard rate of VAT had been signalled and businesses will need to consider the impact of this change for the supplies they both make and receive. There will be implications for businesses operating under both the invoice basis and the cash received basis.
For businesses supplying goods/services on the invoice basis the key issue for the business is to ensure the correct VAT rate is applied, this would be the rate in force at the time the VAT invoice is issued. Consideration here should be given to businesses who issue a pro forma invoice
As you can see this eBrief emphasises one of the key areas in VAT that can cause problems for both the producer/supplier and the cash business being that of the rate of VAT for products. Apply the wrong rate and this could lead to significant error and not just in monetary terms.
The accounting of VAT is another key area which encompasses the use of correct VAT rates.
EU VAT reform plans to be published in December 2011: following the EU VAT green paper on VAT reform it is envisaged that the White paper outlining the proposal s for reform is to be issued this month. The key proposals cover:
• A move towards a single, harmonised EU VAT rate across all 27 Member States.
• A uniformed and consistent set of rules covering VAT registration and VAT returns in all territories.
• Standard VAT invoice format and reporting requirements.
A key objective for all businesses is cost reduction in order to maximise profit yet recent surveys have identified that less than 20% of businesses consider VAT, a key component cost for most businesses, as part of the overall objectives in formulating a Strategy and have performance measures and goals set for the management and control of VAT.