The Irish government announced a lowering of the standard rate of VAT for Ireland as part of the Job Stimulus Package in July 2020. The standard VAT rate was lowered from 23% to 21% for six months effective from 1 September 2020 through to 28 February 2021. On 1 March 2021 the Standard Rate of VAT reverted back to 23%.

When the reduction of the standard Rate of VAT was announced, you could either:

• Create new tax codes to be applied for the duration of the reduction of the standard rate.
  Or,
• Edit your default standard rate tax codes and apply the lower percentage rate.

The action that you took before 1 September 2020 affects what you need to do from 1 March 2021. 

TIP: If the rate change occurs mid-VAT period, your Return's still correct as it picks up transactions based on their dates and tax codes.

Don't worry, we'll explain what you need to revert back to 23%. It's a straight forward process. In this article we'll look at:

• Reverting the rate if you created new tax codes.
• What you need to do if you edited existing tax codes.
• What you need to do with recurring entries.
• Considerations for memorised items.
• What you need to know about outstanding items and customer & supplier records.

Tax codes

Scenario 1 - I created new tax codes

If you created new tax codes, from 1 March 2021 you simply need to start using your original standard rate tax codes again. The default standard rate codes are:

• T1 - Standard rated sales and purchase of goods for resale
• T8 - Standard rated purchases of goods from suppliers in EC
• T11 - Standard rated purchase of goods for non-resale
• T18 - Standard rated purchases of goods from suppliers in EC
• T24 - Standard rated purchases of services from suppliers in EC

Scenario 2 - I edited my existing codes

If you edited existing tax codes, normally T1, T8, T11, T18 and T24, then you need to edit them again to change the percentage rate back to 23% as at 1 March 2021. 

Edit a tax code

1. On the menu bar click Settings, click Configuration then click Tax Codes.
2. Select the required tax code then click Edit.
3. Edit the information as required.
4. Click OK then click Apply.
5. Click Close, then if prompted to save the changes, click No.

Recurring Entries - Invoices and credits

If you use the recurring entry function in your software, any recurring items that include tax rates that need to be updated need to be amended from 1 March.

1. Ensure you've processed your entries up to 28 February 2021.
2. Click Invoices and Credits, Sales Orders or Purchase orders as required.
3. Click New or New Invoice then click Recall.
4. Note the reference of the item you with to change, select it then click Load.
5. Double-click the description of the item you want to amend.
6. Change the tax code to T1 or equivalent, then click OK,
   Repeat this step for any other items affected.
7. Click Memorise then enter the reference you noted in step 4.
8. Click Save then click Close.

Recurring Entries - Bank transactions

If you use the recurring entry function for bank transactions, you may need to update your recurring payments, receipts or if you use VAT Cash Accounting, Sales payments on account.

1. Ensure you've processed your entries up to 28 February 2021.
2. Click Bank, then click Recurring, select the required item then click Edit.
3. In Posting Amounts, change the Tax code to T1 or equivalent then click OK.
4. Repeat for any other recurring items.

Memorised batch invoices or credits

If you've memorised batch invoices or credits for regular use, you can update these templates if you need to amend the tax code.

1. Click Customers or Suppliers as required, then click Batch invoice or Batch Credit.
2. Click Recall and make a note of the template name you choose to edit.
3. Amend the tax code to T1 or equivalent and click Memorise.
4. Save the file using the same file name you noted in step 2.

Memorised bank payments or receipts

1. Click Bank, then click Bank payment or Bank receipt as required.
2. Click Recall and make a note of the template you choose to edit.
3. Amend the tax code to T1 or equivalent and click Memorise.
4. Save the file using the same file name you noted in step 2.

Outstanding Orders and Invoices

If you've any outstanding invoices or orders to update on or after 1 March 2021, you may need to edit the tax codes used on these items.

1. Open the required module, for example Invoices and credits or Sales orders.
2. Double-click the required item.
3. Double-click the description of the item.
4. Amend the tax code to T1 or equivalent.
5. Click OK, and then click Save.

Customer, Supplier and Product records

Tax codes are stored in the customer, supplier and product records, if you need to change the tax codes for your records there are different options available to you:

• If only a small number of records are affected, you can manually edit the records, change the tax code then save them again.
• If a larger number of records are affected you can use the Batch changes option - This feature is available in Sage 50 Accounts Standard and Professional.
• If you use Sage 50 Accounts Essentials, and you need to amend a large number of records, you can export the records, amend the tax codes then import the records again.

TIP: Not sure if you're using Essentials, Standard or Professional? It's easy to check in your software. Click Help then click About. Within Licence Information, check what the Variant is.

Further information

If you're unsure if a transaction is vatable, or if you require further advice about VAT compliance, and how to approach this change in your business, we recommend that you contact Gov.ie or your accountant.