REMINDER: 1st July 2011 – VAT Rate Change/PRSI Reduction

20th June 2011

We wish to remind you of two important changes from the recent jobs initiative which are contained in the Finance Bill (No. 2) 2011. This Bill is currently at committee stage but the changes contained therein are expected to be implemented on 1st July as follows:

Reduced rate of VAT for certain catering and tourism related services
A reduced rate of 9% will apply to certain specific services in order to encourage more spending in these industries. Please click here for a useful leaflet from the Revenue Commissioners outlining which goods and services are chargeable at 9%, and which continue to be chargeable at 13.5%.

What you need to do now as a retailer?:
Ensure your sales system is updated at the close of business on 30th June to take account of the new VAT rate from 1st July. Where you do not update your sales system at this point and sell goods/services incorrectly at 13.5% then you will be liable to pay the full 13.5% VAT collected to the Revenue Commissioners.

As the objective of the VAT reduction is to increase the spending power of the final consumer, we recommend that the change of VAT rate on your sales system results in lower prices (the exception perhaps being meal deals etc. where we believe it is reasonable that a rounded price would remain). The hope would be that the retailer would benefit from increased turnover as a result of lower pricing. The last reduction in VAT in order to stimulate demand occurred in January 2001, however the reduction was reversed in March 2002 on the basis that the VAT reduction was not being passed onto the final consumer.

Reduced Employer’s PRSI on Jobs Which Pay Up To €356 Weekly
This typically refers to employees on PRSI Class AO/AX where you are currently liable to employer’s PRSI of 8.5% (€30.26 on a weekly wage of €356). This rate is being decreased to 4.25%, representing a saving of €15.13 for an employee paid €356 weekly.

What you need to do now as a retailer?:
If you are completing your own payroll on a computerised program you should ensure that you download the related upgrade prior to running your weekly payroll where the pay date occurs on or after 2nd July 2011.

Where we complete the payroll on your behalf the payroll calculations will be updated for pay periods occurring on or after 2nd July 2011.