Mardak has reacted quickly to this news and Mardak Construction Accounts is ready to adapt to the changes. Please find below further details for users.
Given the design of MCA the simplest suggestion is that on 1st December users modify the VAT Code Maintenance for Standard Rated to 15%, and at that point create a new VAT Code for Old VAT Rate at 17.5%.
All existing setup for suppliers, subcontractors, customers will default the new rate immediately without further system changes being required. For the changeover period where supplier invoices are still being received at 17.5% users will need to override the VAT analysis.
All existing VAT transactions are stamped not only with the VAT Code but also the rate applied at time of posting to retain full audit ability on VAT Returns.
There are further implications regarding payments to subcontractors. The legislation is open to interpretation but a few simple rules apply;
i. If Certificates with a tax point of Authenticated Receipt or Self Billing have been placed On Hold then once the VAT Code Maintenance has been updated the act of Clearing Held Certificates will recalculate VAT at the new reduced rate. An on screen message alerts the operator to this.
ii. As per pages 35 and 36 of the HMRC publication VAT CHANGE IN THE STANDARD RATE: A DETAILED GUIDE FOR VAT-REGISTERED BUSINESSES, the Basic Tax point can be considered as being the date when the service is performed.
In light of this it is considered that any Certificates that have been posted as Automatic but not yet paid do not need to be changed and can be paid at 17.5%.
iii. Customers who process subcontractors VAT invoices will undoubtedly continue to receive November invoices with VAT calculated at 17.5% after 1st December.
There are a couple of customers who claim VAT on the subcontractors Invoice but process it as an application and then make payments against a certificate.
We are currently looking at this with our development team and will issue a further notice proposing the simplest and most appropriate solution.
Finally, any users who have configured their Contract Sales such that VAT is updating a VAT suspense account, either on Certificates or Applications that record the VAT as memorandum until the tax point is raised, will need to review their position if any such transactions are outstanding on 1st December. As this applies to very few MCA users we suggest you contact support if you are affected or have any questions.