VAT Rate Change

Nov 25, 2008

@UK PLC will be updating the standard rate of VAT at 1 minute past midnight on 1st of December 2008 (00:01 hrs GMT on 1/12/2008).  This will affect you depending on how you price your goods.

We are going to keep your core price either excluding vat or including vat the same, and just change the VAT rate.

Price Excluding VAT

If you sell ex vat then the amount charged to customers will be reduced by the 2.5% reduction in VAT.

i.e. If you were advertising something as £ 100 then when the customer added it to the shopping basket the total price would be £ 117.50

  • Cost of goods £ 100
  • total before update £ 117.50.  
  • total after update £ 115.00

Result customer gets a discount of 2.1%

Price Including VAT

If you sell inc vat then the price the customer pays will stay the same and the amount of vat you pay on the sale will be reduced by 2.5%.

i.e. If you were advertising somthing as £ 100 then when the customer added it to the shopping basket the total price is £ 100 and the ex vat price is £ 85.11

  • Total cost of goods inc vat £ 100
  • before price ex vat £ 85.11 vat £ 14.89
  • after price ex vat £ 86.96 vat £ 13.04

Result merchant gets an additional profit of 2.2%

In both cases the price initially displayed to customers will stay the same.

This covers all products that are sold at Standard rate.  The system allows you to set up your VAT at Business level, product level and item level and the update will cover all levels.

What will not be covered by the change

If you sell blended rate items e.g. a book with a cd or other composite items made up of a standard rate item and a zero rate item, because @UK PLC do not have the underlying breakdown you will need to recalculate the blended VAT rate and update this on the system for these items.  If you have a number of blended rate items and would like a bulk update of these please contact our support team.

Bulk Adjustment of prices

In the old edit site there is an option to bulk adjust your prices.  It is a very powerful feature, and customers have made mistakes in the past.  You can adjust your prices using this feature if you want to respond to the Vat change by changing your underlying prices.  However, the system will be updated with the new VAT rates, so you will get a double change.

Detailed Guidance from HMRC

As a VAT software provider we have received extensive guidance from HMRC and the following link covers the current guidance from HMRC.