Calculation of VAT on Creation of Proforma Remittance

Description

The proforma remittance functionality has been enhanced so that, for VAT registered contractors, VAT is now calculated on the contractor’s pay items at the time when a proforma remittance document is generated. That is, at the point when a timesheet belonging to the contractor is released for pay processing from the Interpreter.

VAT that has been calculated at the time of generating a proforma remittance is displayed on the document in the Item Tax Amount field and the sum of the individual VAT amounts is shown in the Total VAT field at the document totals level, as highlighted in the example below.

VAT that is calculated when the proforma remittance is generated is not recalculated again when the corresponding timesheet is paid in a pay batch. Instead, the VAT amounts that have already been calculated are brought into the pay batch at the VAT pay batch stage (for more information, see Inclusion of VAT from Proforma Remittance in Pay Batch).

A payee is considered to be a VAT registered contractor if the payee:

has a Tax Type of Contractor, CIS or PAYE
has a Payee Type of Contractor, 3rd Tier Agency, Umbrella, CIS or Deemed Contractor
is flagged as VAT registered.

The VAT registration status of a payee is captured under a payee validity period on the Payee record. The system refers to the payee validity period that applies on the date when the timesheet is released from the Interpreter for pay (i.e. when the interpreted timesheet status type is set to Reviewed -Pay Only or Reviewed - Pay and Bill) to determine if the payee is VAT registered.

Tax Point Determination

For the purposes of calculating VAT when generating the proforma remittance, the system uses the date the proforma remittance is generated to determine if the contractor is VAT registered, by referencing the validity period on the Payee record that applies on that date, and to determine the tax rate that applies.

Benefits

This enhancement allows the proforma remittance functionality to be used to generate documents that meet the definition of a valid tax contractor self-bill tax invoice when issued to a VAT registered contractor. In turn, that allows the pay company to claim the VAT that is paid forward to the contractor at the time when the proforma remittance is generated without the need to wait until the contractor is paid.

For other enhancements in this release that facilitate using the proforma remittance functionality to generate contractor self-bill tax invoices, see:

Configuration

No configuration required.

To display the VAT amounts on the proforma remittance document, the existing Item Tax Amount and Total VAT fields must be added to proforma remittance document format, if the formats do not already include those fields. For more information, see Configuring Document Formats.