Further to the Chancellor's announcement on Wednesday and the guidance set out on Friday by HMRC, our understanding is that for VAT needs to be charged at 5% for the first 28 days of a stay and thereafter at 1%. Your accountant might advise you to use a different figure depending on your business setup, please take advice as we are not qualified to advise you.
For bookings crossing the period, please take guidance from your accountant on how to treat this for your accounting. We have worked on the basis -
- that you will leave short stay bookings crossing the period as they are if you have already invoiced for the stay (assuming the invoice date is before the 15th July).
- for longer stays you will split the stay on the 15th, any invoices that cross the period will be credited off and the new stay (and invoices) will use the new tax rate.
The very last minute notice of the announcement has made it impossible to get a bulk, automated process created and fully tested in the software, as such we have implemented a process for you to manage the split of VAT manually in your system, you can split either type of booking.
The high-level process is as follows -
- Add a new tax season to your VAT Profiles that becomes effective on the 15th July 2020
- The new tax season will be used on all bookings after the 15th.
- For new bookings over the Tax Split, please create the booking in two stays
- For existing bookings that cover the split, please use the new "Split on Tax Season" capability to quickly update the booking and financials.
Adding a Tax Season
The tax treatment on any booking is determined by the Vat Profile on the rate.
The Vat Profiles can be found in Admin - Finance - VAT Profiles
For any VAT profile used by your bookings that is currently using 20% VAT for accommodation (e.g. please leave Standard rate for you extras etc) you will need to shorten the existing Tax Season to 15th July 2020 and add a new Tax Season from 15th July 2020 to the 12th January 2021.
Follow the 12th of January 2021 with a third Tax Season from the 12th January 2021, assuming this changes back to 20% / 4%.
In order to do this you will need to add additional Tax Codes, if you have Res:harmonics linked with your finance package, you should match the Tax codes with the finance package.
Tax Codes can be set up in Finance - Tax Codes
Once the Tax Season is in place you will not be able book over the Tax Season Split, the system will require you to split bookings across the split date before amending them. The system will highlight bookings that require splitting on the grid, by highlighting it in red with a calendar with a cross icon.
After clicking on the booking, you will also be able to see that a split is required, highlighted at the top of the booking in red.
Split the Stay
When you edit the booking, you will see the "Split Stay on Tax Season" button, this will give you the ability to quickly split the booking into two stays and the posted booking invoices across the period will be credited and new invoices will be created on the second stay using the new tax rates.
Once the booking has been split, the red line at the top of the booking will be removed and the two stays are shown.
Please get in touch if you would like to share a screen and we will take you through the process.