'Shareholders in the dark about audit activities'

News Article - 23 May 2012
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UK businesses are currently divided about how to best handle the VAT increase scheduled for early next year, according to a new survey released by the Institute of Chartered Accountants in England and Wales (ICAEW). VAT will rise from 17.5 per cent to 20 per cent on 4th January 2011.

The survey, which questioned 1000 chartered accountants, found that over a third of companies (36 per cent) are likely to absorb the costs of the VAT rise. A further 30 per cent of businesses will increase prices to offset the operational and administrative costs of the rise, whilst 34 per cent will implement both options to varying degrees.

Frequent changes to the VAT rate in the last two years have had considerable financial effect on UK firms. According to the ICAEW survey, 33 per cent now consider VAT changes the most burdensome administrative task in terms of time spent compared to payroll (50 per cent) and corporation tax (12 per cent).

With the economic outlook uncertain and the VAT increase likely to worsen conditions for businesses, all firms must consider how best to handle the VAT hike in January. Companies must have enough accounting staff to deal with direct VAT queries from stakeholders.

In addition, businesses will need to check whether any work falls under a specified cross-over period between the two VAT rates. In these cases the VAT charge will be split so that 17.5 per cent is charged on supplies before 4th January and 20 per cent on work carried out after this date.

Kevin Misselbrook, customer services director with Access, has put together his top 10 essential tips to follow for dealing with the VAT rise. Here are just two of them:

1. Clear down or reduce the orders in your sales order batch
   The most challenging task will be dealing with orders that were created when the VAT rate was 17.5 per cent, but will need to be invoiced in January at the new rate. There's an operational advantage in invoicing as much as you can by the end of this month, as it reduces the amount of manual intervention that you'll need to make after the change. 
2. Encourage your suppliers to invoice you now Posting all your 17.5 per cent VAT invoices before you change the default rate will reduce the likelihood of posting errors after 4th January. It'll also make it easier if you match the gross values of your purchase orders to invoices before approving.

Please contact Access on 0845 345 3300 for more information.

Article keywords: VAT rate rise, Institute of Chartered Accountants in England and Wales survey, ICAEW survey, Kevin Misselbrook

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