Operators have been warned by the Forum of Private Business (FPB) to prepare for the 2.5% VAT rise on 4 January
The FPB said that although the change is fairly simple, it can get complicated when put into practice, particularly for smaller firms such as those in the eating out space, that can’t absorb the increase.
Chief executive Phil Orford said the main problem businesses will run into is changing their accounting systems.
However, the HMRC has said it will take a “light touch” in dealing with errors made in the first VAT return after the change.
If a mistake is made, businesses must issue a credit note and then a new invoice at the correct rate.
“Many smaller businesses will have to changes their prices before they start trading on 4 January and this will take a sizeable amount of forethought for retailers with thousands of items in their product ranges,” said Orford.
“Businesses can of course keep their prices the same and absorb the increase but this will affect their bottom lines.
“Firms will need to make sure that their accounting system changes accordingly and is issuing invoices and recording sales and transactions at the new rate from 4 January.
“Any outstanding invoices for work which was genuinely carried out before the date can still be processed at 17.5% so most businesses will probably need to create a new standard VAT code at 20%, but retain a code for the old 17.5% rate."
