As we all know the VAT rate changed from 17,5% to 15% in December 2008.  The VAT rate will revert back to 17,5% from the 1^st of January 2010. With the experience gained changing the VAT rate back should be plain sailing. J

However, accompanied with this change there will also be a Cross-border VAT change, implemented from 2010 to 2015, for all companies dealing with EU countries.  Please see the following links:

http://www.hmrc.gov.uk/vat/cross-border-changes-2010.htm

http://www.hmrc.gov.uk/briefs/vat/brief5308.htm

http://www.hmrc.gov.uk/briefs/vat/brief0209.htm.

It is very difficult to determine the exact impact at the ground level from reading the above documents. It might be me but I fell asleep a few times. I attended a Dynamics NAV panel meeting on Tuesday where the issue was discussed especially in terms of the impact on Dynamics NAV - Navision. Nothing has been confirmed but Microsoft and the HMRC are in discussion to come up with a solution.

HMRC says the following: “Businesses need to consider whether they will be affected by the changes and what changes to their accounting system will be required to implement these new rules from 1 January 2010, to account for VAT under the reverse charge, and/or to capture the information needed to submit ESLs. They should also consider obtaining the VAT Registration Numbers of regular business customers in other EC countries.”

Broad statement. J

The initial talk was around recording the VAT rates for bath parties involved in the transaction to be able to do the reporting required.  Questions arise like: Is a zero rated product in the UK zero rated in Italy or Spain?  How do you record the different VAT rates for different countries and how do you set it up against items and record it against transactions?

The Microsoft Dynamics NAV team will provide a solution for versions NAV2009, 5.00, 5.01 and possibly earlier versions but it is not clear how far back the Dynamics NAV team will go.  Most of our customers will be on an earlier version than the ones mentioned above and Probitas will need to work with our customers to come up with the best solutions for the individual business in conjunction with Microsoft’s recommendations.

The intention of the blog is to start a discussion between everybody around the detail of the changes suggested by the HMRC.  It is not a well known fact out there and I am also not an expert in VAT.  If you would be so kind as to post all your findings, as I will mine, on the blog it should assist us all in overcoming the challenge set by the HMRC.