UK VAT change - best way of dealing with it in WHMCS

[rcktnick]

It looks likely that the UK rate of VAT will be reduced to 15% today.

 

If this does happen, what's the best way of doing this in WHMCS? In the tax setup screen you can't edit existing tax rates (and I don't know whether this would affect previously generated invoices or not).

 

If I create a new tax rate, would I have to then change every product and client to use it? (and then back again, if it rises again in the future?)

 

What's the most effective way of doing this (if we may have to implement this at short notice).

[Matt]

If the rate does need changing, you would just need to delete the existing rules and setup the new ones. Existing invoices are locked in at the rates that were set at the time they were generated so deleting/altering the rates in the configuration area will not affect previous invoices, only future ones.

 

Matt

[rcktnick]

Thanks - looks like it does need changing from Monday. Good to know it won't affect previous invoices.

[othellotech]

It depends on if you're on cash or accrual accounting systems and your turnover.

 

If on cash accounting you just change the rate on Monday, and then on all yoru outstanding/unpaid invoices, you either do a quick query to recalculate the price, or untick the tax option, save, retick the option, save on each invoice line

[isdoo]

Surely you wouldn't alter the VAT on previously issued invoices in any event - the amount of VAT applied is at the date of invoicing irrespective of your accounting method.

[othellotech]

Surely you wouldn't alter the VAT on previously issued invoices in any event - the amount of VAT applied is at the date of invoicing irrespective of your accounting method.

 

No its not

 

On *accrual* basis it's the vat applicable on the date the invoice was generated

 

On *cash* basis, its the rate applicable on the date payment was made (although for most people they use the date payment was received) - technically this can mean in the event of a VAT reduction, that clients have overpaid, so you reissue the invocie and credit their account with the overpayment.

 

It's potentially further complicated if you bill in arrears, as its the rate applicable at the end of the period for which service was supplied ...

 

Basically if you've advance created invoices which are for thepeiod after 1st December, they'll have the wrong rate on them - the "correct" methodology would be to have an applies-date on each tax type, so on the existing VAT 17.5% you'd set a new rate for items on/after 1st December of 15, and the system will take care of it, what we're doing to minimise the paperwork/agro, is to suspend the cron until the 1st December

[openmind]

It the words "Tax Date" and a date on the invoice that is key. If the tax date is before 1st December then 17.5% applies. After it's 15%

 

Complete PITA and totally pointless exercise but it gave Darling something to do yesterday afternoon instead of embroidery :rolleyes:

[rcktnick]

No its not

 

On *cash* basis, its the rate applicable on the date payment was made (although for most people they use the date payment was received) - technically this can mean in the event of a VAT reduction, that clients have overpaid, so you reissue the invocie and credit their account with the overpayment.

 

 

Not according to the advice issued by HMRC:

 

How does the change of rate affect my cash accounting?

 

You must remember that the scheme allows you to account for your VAT liability

when you receive payment. It does not affect the tax point. The tax point is the

time that the sale is made under the law and it determines the rate of tax

applicable. Annex B tells you more about tax points.

 

This means that VAT will be due at 17.5% on supplies you made before the rate

change, even if you receive payment after the change. When you receive

payments in the months after the rate change, you will need to identify those

payments which relate to supplies before the rate change and on which VAT is

still due at the previous 17.5% rate.

[TheHostingHeroes]

anyone got any scripts to auto remove then auto add VAT to invoices that should be charged VAT to apply the new rate?

[rcktnick]

@cyberhostpro: You don't need to do that - just change the VAT rate (as advised by Matt in post #2 above) on Monday (1st Dec).

[openmind]

OK I think I've seen a major issue with this.

 

Agreed it's simple enough to change the tax rules

 

BUT

 

If you are storing the costs as excluding vat values then after the change the inc vat price will be different.

 

The only way round this that I can see if you are storing the price exclusive of vat is to update all recurring costs, domains, plans, the lot...

 

Or am I wrong?

[rcktnick]

 

If you are storing the costs as excluding vat values then after the change the inc vat price will be different.

 

That's the entire point of cutting the rate - so the customer pays less, but you still receive the same income.

[openmind]

Yep understood but I may not want to pass the 2.5% onto customers

[rcktnick]

Glad I'm not one of your customers.

[openmind]

OK let me put it like this.

 

We have advertising all over the place for a, for arguments sake, £30 pa plan. If we passed the 2.5% onto customers it would be worth precisely 75p

 

Domains we sell for £7.99 inc vat. VAT change = 20p difference.

 

Now the majority of our customers are VAT registered B2B clients so they don't give two hoots what the inc vat price is.

 

This only affects B2C and the difference is in pennies.

 

So rather casting judgement on our business policies and how they may not reflect yours, how about some constructive feedback

[rcktnick]

OK let me put it like this.

 

We have advertising all over the place for a, for arguments sake, £30 pa plan. If we passed the 2.5% onto customers it would be worth precisely 75p

 

Domains we sell for £7.99 inc vat. VAT change = 20p difference.

 

Now the majority of our customers are VAT registered B2B clients so they don't give two hoots what the inc vat price is.

 

This only affects B2C and the difference is in pennies.

 

So rather casting judgement on our business policies and how they may not reflect yours, how about some constructive feedback

 

OK, here's my (hopefully) constructive feedback - of course it's entirely my opinion, I know nothing about you, and your business' policies are of course up to you - so please take this as a general discussion of the topic rather than a direct criticism of you.

 

My thoughts on the whole idea is that it's political smoke and mirrors - a very minor saving for most people, with a disproportionate cost for businesses, and huge administration costs for the government.

 

But, rights and wrongs aside, it's happening, and for a specific reason - to stimulate consumer spending. I view any business that, instead of passing on the tax cut in the spirit it is intended, chooses to profiteer in the same way I view the banks that are quick to pass on rate rises, but fail to pass on interest rate cuts - more interested in profits than its customers.

 

What you're proposing in your example would be detrimental to B2C customers (as they're not getting the benefit of the rate cut) and detrimental to B2B customers (because if you continue to sell at your VAT inclusive advertised price, say £30 inc VAT, they will actually be paying £26.09 ex VAT, instead of the £25.53 they were before).

 

What I was saying (and apologies if it came across as nonconstructive or inflammatory), is that there is plenty of choice out there, and as a consumer it's my choice to not continue to deal with companies that don't take what I see as the correct course of action.

 

For businesses which DO pocket the difference, it only takes 1 in 40 (2.5%) of customers to feel the same way as me, and the loss will potentially outweigh the extra profits.

[openmind]

I can see what you are saying and apologies if I sounded brusque, Mr Darling has a lot to answer for

 

I'm actually still hovering between changing prices or not. The biggest thing that bothers me is a more aesthetic point and that is selling plans at £29.25 instead of £30

[openmind]

On a side note we have actually swallowed a cut in margin due to increased server costs which was down to the data centre having increased bills for power.

 

The increase was actually 6%, an increase we did not pass onto customers.

 

So I could turn this on its head and say OK we're not passing the 2.5% cut onto you but then we didn't increase prices by 6% six months ago either so you're still better off

[redrat]

It is, however, a legal requirement to correctly administrate Government VAT Inputs and Outputs to the best of my knowledge. It certainly is time consuming though especially since I gather this drop reverts back to 17.5% fairly soon.

[openmind]

Yes it is a legal requirement and one we adhere to by collecting the correct amount of VAT and only reclaiming what we are allowed to do. The point here is whether or not to pass the change onto customers.

 

It changes again in 13 months time so all change again at that point...

[rcktnick]

On a side note we have actually swallowed a cut in margin due to increased server costs which was down to the data centre having increased bills for power.

 

The increase was actually 6%, an increase we did not pass onto customers.

 

So I could turn this on its head and say OK we're not passing the 2.5% cut onto you but then we didn't increase prices by 6% six months ago either so you're still better off

 

You could do like Darling and reduce it now, but put it up to the much higher rate in 6 months time ;-)

[openmind]

Or I could sell the business and go and live in a cave which is becoming very appealing at the moment....

[isdoo]

No its not

 

On *cash* basis, its the rate applicable on the date payment was made (although for most people they use the date payment was received) - technically this can mean in the event of a VAT reduction, that clients have overpaid, so you reissue the invocie and credit their account with the overpayment.

 

Not according to the advice issued by HMRC:

 

How does the change of rate affect my cash accounting?

 

You must remember that the scheme allows you to account for your VAT liability

when you receive payment. It does not affect the tax point. The tax point is the

time that the sale is made under the law and it determines the rate of tax

applicable. Annex B tells you more about tax points.

 

This means that VAT will be due at 17.5% on supplies you made before the rate

change, even if you receive payment after the change. When you receive

payments in the months after the rate change, you will need to identify those

payments which relate to supplies before the rate change and on which VAT is

still due at the previous 17.5% rate.

 

Thanks - I did call my accountant and he also said that I should not be altering any old invoices still due for payment.

[mediademon]

UPDATE `whmcs`.`tbltax` SET `taxrate` = '15.00' WHERE `tbltax`.`name` ='VAT' ;

 

Job done...