4 Reasons to update VAT rates on your EPOS system

09/09/2021 Duncan Colvin

“You’re probably familiar with the acronym GIGO, or in full, Garbage In Garbage Out. Till systems are only as good as the information programmed in.
So if the prices and groups or categories of menu items and till buttons are not regularly updated, then it simply will not work effectively. Make sure you keep your EPOS system match fit by updating VAT rates.”

– Duncan Colvin, Head of Compliance, Venners

Why your EPOS system needs VAT rate updates

When the temporary lower VAT rates for food and soft drinks were first introduced during the COVID-19 crisis on 8 July 2020, not all operators saw the benefit of adjusting their EPOS system, believing in part, that the reduced rate would be temporary. But since then VAT rates changed twice more, making it all the more crucial to keep EPOS systems up to date.

Beginning of October 2021 VAT rates will rise again to 12.5%, with a further rise expected in spring the year after. Now is the moment to ensure the correct VAT rate is applied to all your products and report grouping of items is appropriate. There is good reason to invest time in this process. Making sure your systems are set to the right VAT rate for the right categories is crucial for your revenue reporting, customers, stock controls, stock reporting and analysis. Here’s why:


1. Apply the correct rate to avoid fines

For some businesses, the till system is the main source of revenue reporting. If a business is using the till system to report net sales into the VAT return it is vital that they are aware of the net sales volume at 5%, 12.5% or 20% to avoid inadvertently paying too much or too little VAT.

Business that rely solely on thier EPOS system to record VAT due are in danger of under declaring monies owed to HMRC. With the additional VAT burden on businesses it is very likely that HMRC will be monitoring declarations to account for expected rises in payments. Businesses that inadvertently do not make updates to their till records and under-declare may be noticed and flagged for investigation.

The longer the underpayments persist the greater the risk of a fine and a requirement to make a large payment that had not been forecasted in the business. As cash flow is still the priority for businesses working towards rebuilding post pandemic, a surprise back dated payment would certainly hurt in the new year.


2. Correct receipts for customers to ensure return visits

Receipts should be reporting VAT correctly to avoid any business customers and professional guests, who use your receipts to claim back the VAT they’ve paid, underclaiming the payment they’re due on a meal, based on the information supplied in your receipt.

These types of customers will certainly not thank you if VAT splits are incorrect on any receipts. Making sure the rate bands are clear and separated may sway a business customer to return if they are confident that the receipt will not raise any questions on their expenses.


3. Tidy up stock categories to support stock analysis

Where food and soft drinks were rated at 5.0%, operators may have been tempted to add all minerals and soft drinks into the food category of their EPOS. This would have been a quick fix but also unnecessarily complicate accurate stock reporting and quick analysis of costs against sales.

If this was what your business did, don’t fall into the same trap again. Making sure these categories are split appropriately is of utmost importance. This will assist in clear revenue and item sales reporting to your stocktaker, allowing for more accurate analysis of your stock results and monthly and yearly comparisons to remain precise.

When completing a full stocktake, your auditor should be looking to balance the revenue reports to the till. Clear categories with correctly assigned VAT will help balance cash taken to till sales.


4. Make the most of combination sales

Be sure that your till system is correctly splitting any promotion buttons that you may have programmed in. Does a Gin & Tonic promotion record the two separately?

Consider reducing the gin price by the promotional discount rather than the tonic to take full advantage of the VAT rate difference.


Don’t forget to do the checks!

It is imperative that all your systems are set up as they should be to avoid the aforementioned pitfalls. Time spent now checking through these elements will ensure that your revenue and stock control reporting is as accurate as possible. If you need help, Venners’ compliance team are able to do a detailed compliance checks to make sure that all your sites have accurately set up till systems.