Vat change from 17.5% to 15% and how it affects guests and clients.
No Gross Selling Price Reduction Required for the following;
- Any goods or services where agreement to purchase has been made after the 1st December 2008 but before 31st December 2009 will be charged at a standard rate of 15%.
- Any goods or services (bookings or purchases) made after the official notification of the VAT change on the 25th November 2008 for arrival or consumption after the 1st December 2008 but before 31st December 2009 are quoted at rates inclusive of 15% VAT.
For the above two scenarios no adjustment to final bills will be required for the VAT change from 17.5% to 15%.
Gross Selling Price Reduction Required for the following;
Where an agreement was made before the 25th November 2008 between the Crown Spa Hotel and a client for goods or services to be supplied by the hotel after the 1st December 2008 but before the 31st December 2009 an adjustment for the reduction in the VAT rate from 17.5% to 15% will need to be reflected in the gross selling price.
This change though not a contractual right according to our terms and conditions is a change that the management has chosen to implement to encourage economic stimulation in the economy at this very difficult time for the country and to comply with the ethical stance of our Corporte Social Responsibility Statement (CSR).
How will this affect your final bill if the senario above applies to you?
For example if you had booked a 2 night stay for 8th December 2008 in October 2008 for £112.50 B&B per room per night for 2 persons your accommodation charge under the old VAT rate of 17.5% would be £225.00 in total (if no goods or service were booked to your room during your stay).
Under the new VAT rules your bill is reduced by ( (115/117.5)*£225.00) to £220.22; affectively a reduction of 2.1276%.
Yes! Not just a simple 2.5% reduction as the previous 17.5% VAT gross price was reached by multiplying the net rate of £191.49 * 1.175 to reach £225.00.
To reach the correct gross price at 15% VAT the net selling price of £191.49 is multiplied by 1.15 = £220.22.
Any drinks purchased during the example stay above will be at the VAT rate and gross selling price at the time of the purchase (i.e. 15% VAT and a gross selling price reflecting this from 1st December 2008 to 31st December 2009).
Another example of the VAT reduction has been a reduction in our premium Health Club membership from £48 to £47 as the membership fees were agreed before the 25th November 2008. As a result the management has reduced all our membership fees for the period 1st December 2008 to 31st December 2009 to fairly reflect the VAT rate change.
We will have adjusted all relevant pricing in the systems we operate, so that this needy boost to the country's economy is implemented by our organisation and so that as an organisation we comply with our Corporate Social Responsibility Statement.
Accounting for VAT between 1st December 2008 and 31st December 2009 will be at 15%.
As an organisaton that sells goods and services with a long lead time before the tax point date for VAT is reached we have had to deal with two issues;
- Changing the VAT rate from 17.5% to 15% in our systems, a tasking but relavtively easy change consuming around 15 man hours.
- Changing the Gross selling price for business quoted before the official announcement on the 25th November 2008 for tax point dates between 1st December 2008 and 31st December 2009 consuming 40 man hours.
We estimate the cost of implementing these changes above in our systems to have cost around £2500 with man hours in house and support costs.
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