When the Chancellor announced the decrease in standard VAT from 17.5% to 15% many of us wondered if he had fully considered the implications of the change. Yes, you will save 21p on a £10 purchase, but what has it cost the retailer and supply chain to implement that change?
Fortunately if they are using Microsoft Dynamics NAV their change was easily managed. VAT rates are not hard coded in the software so the simplest activity is to change the percentage in the VAT posting group table. More consideration was needed around how to manage reports where calculations may have been written into the report. The Microsoft Dynamics NAV development team, based in Denmark, had already dealt with this issue when Belgium changed their VAT earlier in the year so within a week of the announcement, tools were provided to NAV partners to manage the change in VAT in each client site.
One of our clients had not long been live on Dynamics NAV when the change came in: “Once you understand NAV it’s so easy. We knew the way VAT Posting Groups were set up so we knew how to change it. We didn’t even need to contact the TVision support desk.” Emma Holford, GRS Group.
There are still accounting considerations that our clients will have to work through themselves; for example, managing part-paid invoices. All our clients were reassured that the system could cope with the change and that Microsoft acted swiftly to provide tools to make this even easier. Very reassuring, especially for our wine trade clients who also had to implement the change in duty at their busiest trading time. Dynamics NAV users can continue to look forward to a happy Christmas!
VAT 15% Change Q & A
1. Where do I change the VAT % in Navision?
You change the VAT % in the VAT Posting Setup.
NAV V4&V5: Financial Management → Setup → VAT Posting Setup → Posting Setup
NAV V3: General Ledger → Setup → VAT Posting Group → VAT Posting Setup
2. My VAT code is called VAT17 or similar. Can I leave it as this?
Yes, you could leave it as VAT17, but you will need to change the VAT % field. However, your system might use the VAT17 code on Posting Documents or other Reports. Navision will allow you to rename this will update all associated records in the system. A suggestion would be to call it ‘STANDARD’, ‘STDVAT’ or ‘STD’.
3. Should I change the VAT Identifier in the VAT Posting Setup?
Depending on your own Order/Invoice layouts, the VAT Identifier maybe displayed in the VAT Summary box and sometimes on the Sales Lines in the example below:
Similar to Q2, it might be advisable to change the name of the VAT Identifier to something more generic. It’s important to ensure you change all the existing VAT Identifiers in the same group, e.g. ‘VAT17’ to ‘STD’
With un-posted Orders/Invoices, the VAT Identifier is used to group the lines with the same code, where the VAT rate is calculated on the group total. This is a more accurate way to calculate VAT as opposed to per line. Therefore, you should not mix different VAT Identifiers and % rates in VAT Posting Setup.
4. Should I create a new VAT Posting Group with the new code (VAT15)?
Following on from Q2, if you have a standard code, then this should be set at 15%. If you create a new code like VAT15, then you will need to change all your Income Statement G/L Accounts, Items, Resources, VAT Statement and all open Orders/Invoices that will be posted after 1st December 2008.
We would recommend you create two new codes to only deal with the old 17.5% rate should you receive a Supplier Invoice at 17.5% or you need to retrospectively post a Vatable transaction in prior periods;
5. I have already created an order/invoice but have not posted it. Will it be correct if I post in after 1st December 2008?
‘No’, if your Tax Point/Posting Date is after 1st December as the 17.5% rate will be calculated. You will probably need to reselect the ‘VAT Prod. Posting Group’ code on each line to update the calculation to 15%.
If you cannot see the ‘VAT Prod. Posting Group’ column, then show this on your lines.
View → Show Columns → Tick the VAT Prod. Posting Group → Press OK.
Always check the Statistics Form (F9) to check the VAT Totals before posting it thru.
Of course another solution would be to delete this Invoice and start again.
6. I have an Order part Invoiced at 17.5% VAT, how should I process the remainder at 15%?
If possible, change the original Quantity to match the Invoiced Quantity on each line.
Then add another line for the difference to allow the system to calculate the new rate.
7. I need to create an Invoice from a Shipment or Receipt posted prior to 1st December. What VAT % will be used?
It’s likely the older VAT Calculation will be copied from the source document. Similar to Q5, you just need to ensure you reselect the ‘VAT Prod. Posting Group’ code to update the percentage to 15%.
8. A supplier has sent me a VAT17.5% invoice after 1st Dec. How can I process this?
a) You could return the Invoice/Order back to the supplier for correction.
b) Continuing on from Q&A No.4, you could use the new OLDVAT code created.
c) You could enter their VAT calculated amount even though it’s incorrect. Navision allows you to alter the VAT Amount calculated up to a predefined tolerance set in your system.
Firstly, in General Ledger Setup you need to set either the Max. VAT Difference Allowed. You will need to estimate an average amount of the potential difference between 17.5% and 15%. Start with £50 (your decision), but this may need to be increased depending on the Invoice value being processed.
Next, in Purchase and Payables Setup, you enable Allow VAT Difference.
To change the VAT Amount on the Order/Invoice, you must open the Statistics (F9) form and change the VAT Amount column from the General Tab (or Invoice Tab for Credit Memos).
9. I need to re-print an old Posted Invoice/Credit Memo calculated at 17.5%.
After the changes made, will I be able to do this?
Yes you can. Navision stores the VAT details against the lines on the Invoice and does not refer to the current setup.
10. Do I need to make changes to my VAT Statement in Navision?
Probably ‘no’ if you have followed the answer to Q&A No.2. If you decided to introduce a new code, then you will need to add new lines to your VAT Statement setup.
You might also want to change the Description Lines from stating 17.5%.
11. Can I test these changes before the 1st December 2008?
Yes! It’s highly advisable to test these changes in your Test/Training database. We would expect this is done before any major setup change carried out in your Navision system.
