In the UK our Darling Chancellor of the Exchequer announced with one weeks notice a change to the standard rate of Value Added Tax (A more complicated form of GST for the US audience). This is not the place to debate if such a fiscal adjustment was correct, but as is typical of most politicians his grasp of the realities of business is a little wanting.
The change should be relatively simple, just change the VAT coding in your system so that the Standard Rate is 15% as from midnight on 1st December 2008. However as with any tax change the practicalities are a little different. The basic rule is straightforward, if the Tax Point Date (The Date at which the Tax is calculated) is after midnight on 1st December 2008 then the rate of tax to be applied is 15%, before that date and time it is 17.5%. But note that this is NOT the date at which the invoice is sent or received, it is the date at which the taxable service/sale took place. Therefore, according the the rules you can send or receive an invoice up until 14th December 2008, that has a tax point date of 30th November 2008.
It is also worth noting that for credit notes the rule is that, no matter when the credit note is raised, if the credit is for a product or service charged at 17.5% then the credit note most refund VAT at 17.5%.
Now most ERP systems can cope quite easily with this change, especially when they are processing paper invoices, because a human being can make a choice as to what rate of VAT to apply (15% or 17.5%), however for electronic invoices it is more difficult because somehow you have to be able to marry the correct tax code from the sender to the correct tax code for the recipient. And of course there are many different ways and codes companies can and have implemented.
But here is the great advantage of an Outsourced EDI solution. One of the old fashioned on site EDI solutions sent me a copy of a four page document on changing their systems which your IT team had to do, and this assumed that the change you made were in line with those of your trading partners.
Our customers, and I assume the customers of other Outsourced EDI providers, had a much easier task. Firstly we asked our customers what they intended to do (add a new VAT code, stay with one VAT codes etc), then we asked the trading partners (where required) what they intended to do and finally if any changes were required, the support team at First B2B Limited dealt with it.
So here is one of the main advantages of Outsourced EDI, at least with First B2B Limited, we helped our customers take the pain out of Mr Darling's little tax change for them, and their trading partners.
