The key principle regarding the VAT rate change is the transaction date:
The VAT rate to apply depends on the time of supply rules. In simple terms, this is the date on which the transaction is deemed to occur according to the VAT Act. The general time of supply rule is the earlier of when –
• an invoice is issued, or
• payment is received.
Most transactions which occur on or after 1 April 2018 will be subject to VAT at the new rate of 15% unless a special time of supply rule or a rate specific rule applies.
Vendors must ensure that accounting systems are set up to process transactions at the new VAT rate of 15% from 1 April 2018. CO3 Technologies will be doing this for our BPO customers.
WHAT CHANGES IN BPO
Each company must amend the standard tax rate on BPO from 14% to 15%. A new rate of 14% must be entered into the system so that, where necessary, a person can process an invoice at the old rate if required and provided they have access.
QUOTES AT OLD RATE
All quotes done on BPO on or before 31 March reflect the old VAT rate. The VAT amount is shown separately. When these customers accept this quote and the invoice is generated, the invoice must be done at the new VAT rate of 15%. if accepted and paid from 1 April 2018. If the quote is paid by 31 March 2018 then would be at 14% even if invoice only processed after the 31 March.
CREDIT NOTES AND RE-INVOICE
If the invoice was at 14% and is credited, the credit note must be processed at 14%. The new invoice (if backdated) must also be processed at 14% because the invoice relates to supply before 1 April. This would apply to most contract invoices done in April. To do this the user will have to select the 14% tax rate in BPO.
If the invoice is not backdated (because the invoice relates to a supply done after 1 April) then the new vat rate of 15% should be used.
If you would like more information on this VAT change please contact us.