ConfusionThe change in VAT rate on 1st December 2008 went relatively smoothly for accounting software vendors. The SaaS vendors all showed off that we got any required changes rolled out in the blink of an eye, some of us didn’t even need any changes.

But in reality the offline, locally installed, disc-based, on-premise, old fashioned (whatever you want to call it!) vendors also got any required changes out to their customers in adequate time. Some of them tried to use it as an excuse to force you to upgrade or buy a support contract – but that was no surprise.

But I think there’s trouble brewing that hasn’t quite come to the surface yet.

Our software exports data in a format compatible with Sage 50 and with the excellent Digita range of products. It can also automatically email you your data as a backup in this format every week. Some of the files we generate for this require that we include the “T” code.

Sage uses T codes to indicate what VAT rate is applied to a transaction. T1 means “Standard Rate”. So if the transaction in KashFlow is standard rated for VAT then we list it as T1 (yes, yes, we take into account the EC stuff, now isn’t the time or place!).

One of our Partner Accountants got in touch today to say that our export files were “wrong”. She said that we should be showing T1 for items prior to 1st Dec ’08 and T6 for items after that date. Why T6? It was just the code they chose to use for transactions at 15% so as to differentiate from those at 17.5%

My thoughts on the matter were that we were right to show it all as T1. It’s all still Standard Rate, it’s just what that underlying percentage rate actually is that’s changed.

I posted on UKBF where there is an army of knowledgeable and helpful accountants to try to get some clarification and other views on the matter.

It turns out I’m in agreement with Sage (now that’s a turn up for the books!): their guidance was to stick with T1 and set it to 15%. But it this wasn’t practical for most people, so they’ve all chosen one of the many spare T codes between T0 and T99. There’s no consistency at all in what’s been chosen by different people.

To stir things up even more, we’re all meant to be changing back to 17.5% at the end of this year. What random codes will we all choose then?

I’m not sure what other specific problems this may cause. I’m not an accountant. But something tells me that we’re going to hear much more about the problems this confusion has caused. Just remember where you heard it first!

Still, at least the minor change in VAT rate staved off a recession. Oh, hang on…

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