VAT Rate Change: Is your Business Prepared?
A temporary reduction in the standard rate of VAT for a six month period was announced by Government as part of the July Stimulus Package.
The VAT rate in Ireland was decreased temporarily from 23% to 21% effective from 01 September 2020 to 28 February 2021.
The rate is now due to revert back to 23% with effect from 01 March 2021.
Planning for the change back to 23% VAT
The change impacts the majority of business owners in Ireland.
We are advising our clients to prepare by considering all processes/systems that may be impacted by the rate change and suggest carrying out and testing any changes well in advance of the changeover date.
We have provided a useful checklist below to help you get started.
Do you know how to update your systems to reflect the VAT rate increase? If not, do get in touch with Avid Partners and we will go through what’s typically involved. If you changed the rate in September, your business will already have had a 23% code on the system. Check that it still functions correctly and change back to that rate from 01 March 2021?
On or after 01 March 2021, invoices issued by one VAT registered person/entity to another or an invoice issued to a VAT-exempt business should show VAT at 23%. This is so even if the goods or services were supplied before this date.
- Consider all scenarios
What if you raised an invoice charging 21% VAT and a customer requests a credit note after the rate has changed to 23%? This may involve applying the 21% rate during the period of the rate reduction. Check if your systems are flexible enough to deal with these kind of events? Again, get in touch with Avid Partners, if you need any assistance with regard to your invoicing process/system.
- Existing Contracts
Consider all existing contracts. Are prices stated on a VAT-exclusive or inclusive basis? Revenue state “If contract to supply goods or services is entered into before the date of a change in a VAT rate, and the contract is not completed until after that date, then the agreed price is subject to an appropriate adjustment on account of the change in the VAT rate, unless there is an agreement to the contrary between the contracting parties” Further information is available on Revenue’s website
- Direct Debits
Your business may pay VAT to Revenue on a monthly direct debit basis? If payments were reduced since September, they will now change to include the original rate of 23% ? Do you pay any other creditor/supplier by direct debit? A similar increase may apply from 01 March.
Finally, should you factor the VAT increase into your pricing? Particularly applies to retailers who set their prices on a VAT-inclusive basis. For those retailers who reduced prices to reflect the change in VAT rate in September, prices should now revert back to include the original rate of 23%, effective from 01 March 2021.
Note: not all businesses are impacted by the rate change. This includes many activities in the tourism and hospitality sector such as meals and hotel accommodation, housing and hairdressing as well as construction, the cleaning sector and car rentals, which operate at a rate of 13.5% VAT.
If you require any assistance with this topic or any area of business or financial advice, contact Jamie O’Hanlon on 0818 303087 or email firstname.lastname@example.org.
"A breath of fresh air. Your firm demonstrated enormous commercial understanding in turning around negotiations with a potential target vendor. I admire your style and ability to drive the deal forward. Many thanks."
"I would like to say I'm very happy with your service, especially the audit team, your staff are always friendly, helpful and a pleasure to deal with."
"Your business approach to clients is very impressive. I have always found that when explaining the types of service on offer, it is always concise and straight forward. The level of trust that clients place in your company and its staff speaks volumes."
"I would like to take this opportunity to say how much we are impressed with your company's professionalism, it has been a pleasure working with you all and we look forward to working with you in the future."
"Avid Partners - Accountants & Business Advisors are an excellent firm of accountants, their quality ethos is outstanding."
"I have dealt with Jamie O' Hanlon, of Avid Partners - Accountants & Business Advisors Chartered Certified Accountants, for a number of years as he is auditor to one of my clients. I have always found him to be professional and responsive in his approach."
"Service is second to none; there is always someone at the end of the phone for any business advice. The staff are very easy to get along with, very approachable and know exactly what they are talking about"
We at Fitzies Bar have worked with Avid Partners - Business & Financial Advisers for over five years. We find that the advice and support offered to us in addition to all of our book-keeping requirements to include payroll, VAT, etc. is invaluable and has helped to contribute to our continued growth especially in these challenging times. I would have no hesitation in recommending Avid Partners.
Jamie and his staff are a pleasure to work with. They respond promptly to any queries we have and are critical to our financial planning and the future needs of our business. I would highly recommend them to anyone interested in accounting services.
We at Stillorgan Cycles have used Jamie and his Team at Avid Partners – Accountants and Business Advisers for over five years. We have found that the retail advice and support offered to us is second to none and has helped to contribute to our continued growth especially in these challenging times. I would have no hesitation in recommending Avid Partners.
I met Avid Partners through a local business networking group. We had been using the same accountants for years and found that in these harsh economic times that we were not getting good enough value or service. We were very impressed by the company's professionalism and enthusiasm and genuine interest in helping us get the most out of our business. As a result we are now clients of Avid Partners and are thrilled with our decision.
After meeting Avid Partners with a view to changing our accountants, we came away with a better deal financially and a feeling that we were in capable hands. We feel that Avid Partners has a personal interest in the welfare of our business. Avid Partners have given us great advice, help and support and respond to our day to day queries with speed and efficiency. We feel it was a great move for us to change to Avid Partners.