VAT is constantly changing as new regulations can be brought in every year. The regulations which are different from the older edition of the book are given below.
- The threshold for VAT registration is £83,000 (from April 2016). Similarly the VAT deregistration threshold is £81,000. Future changes are usually announced in the annual budget by the Chancellor of the Exchequer. 2)
- Suppliers have been able to charge VAT on the discounted amount of any supply where a prompt payment discount (settlement discount or cash discount) is offered, whether or not the discount is taken. This will no longer apply from 1st April 2015. Payment of VAT must be on the actual amount paid (the consideration). An adjustment to the VAT amount will need to be made if the customer takes the settlement discount; no longer can it be assumed that the discount will be taken whether or not it actually is.
- The AAT have informed us that calculating VAT on the reduced amount (the old method) will still be tested until December 2016, even though it cannot be applied in the real world from 1st April 2015. However, for all assessments taken on or after 1st January 2017 this concession will be removed – VAT must be charged on the actual amount paid.
This means that those students with the older edition of the text book will need to study settlement discounts (now referred to as ‘prompt payment discounts’) in a different way. You will need to deal with credit notes for allowing prompt payment discounts and record them in a discounts allowed, or a discounts received, day book.
The three column cash book will no longer be appropriate and a two column cash book will be used (showing cash and bank but no discounts).
These changes are described in the new version of the text book, which you will now find in your Premier Programme.
For those studying Level 2 the book with the changes is now Bookkeeping Transactions and Controls. While it is recommended that you read the whole of this book the important points are given on:
For those studying Level 3 the book with the changes is now Indirect Tax. Again it is recommended you read the whole book, but the important changes are given on:
REMEMBER THAT FROM JANUARY 2017 ANY OLD METHOD SHOWN FOR SETTLEMENT DISCOUNTS WILL BE MARKED WRONG AND YOU WILL LOSE MARKS.