GST for Guernsey businesses: your practical FAQ
GST is coming to Guernsey, and businesses are understandably starting to ask what it actually means for them.
Do I need to register? Will I need new software? What happens to my prices? Can I still do my own bookkeeping? And what should I be doing now?
The good news is that for many businesses, GST should be relatively straightforward once the right systems and processes are in place.
We’ll keep this page updated as more of the detailed rules and implementation guidance are confirmed. In the meantime, here are some of the practical questions we’re being asked.
Getting started
Do I need to register for GST?
Under the proposed framework, businesses with more than £300,000 of taxable supplies will be required to register for GST. Smaller businesses will be able to choose to register voluntarily.
Importantly, the test relates to taxable supplies, not simply whether your business has £300,000 going through its bank account.
More detailed guidance will be needed on exactly how the registration rules will operate in practice.
I'm below £300,000. Should I register voluntarily?
Maybe. There won’t be one right answer for every business.
A voluntarily registered business can reclaim eligible GST on its business costs, but will also need to charge GST where applicable and deal with GST returns and record keeping.
Your customer base matters too. If most of your customers are GST-registered businesses, GST may be largely neutral for them because they can generally reclaim eligible GST. If you mainly sell directly to consumers, pricing may be a bigger consideration.
We’d suggest looking at your numbers before deciding.
What if I don't register?
You won’t charge GST to your customers, but you also won’t normally be able to reclaim the GST you pay on your business costs.
So being below the registration threshold doesn’t necessarily mean GST won’t affect your business.
How does GST actually work?
At its simplest, a GST-registered business:
charges GST on its taxable sales
less
reclaims eligible GST incurred on its business purchases
and pays the difference to Revenue, or may receive a repayment where appropriate.
So GST isn’t simply an extra percentage of your turnover that the business loses.
Running your business
Will I need to put my prices up?
Not necessarily, but every business should think about pricing.
You might add GST to your existing price, absorb some or all of it within your current price, or review your pricing more widely.
For businesses selling mainly to GST-registered businesses, the impact may be different from those selling directly to consumers who cannot reclaim GST.
This is one area where looking at your margins before GST arrives could be very worthwhile.
Do I need new accounting software?
Not necessarily.
If you already use modern cloud accounting software such as Xero, you are in a good starting position. Xero is designed to deal with consumption taxes in other jurisdictions and can capture tax on sales and purchases and produce the information needed for returns.
The important bit will be making sure your system is configured correctly for Guernsey GST and that transactions are being coded correctly.
If you’re currently using spreadsheets or older software, now is a good time to consider whether it will still be the easiest way to manage your accounts once GST arrives.
I do my own bookkeeping. Can I carry on?
Absolutely.
GST doesn’t mean you suddenly need to outsource your bookkeeping.
If you enjoy doing it yourself, we can help you get your Xero set-up GST-ready, show you what you need to do and let you carry on.
And if you’d rather not do it yourself, we can help with some or all of the bookkeeping too.
Will Xero just calculate everything for me?
It will do a lot of the heavy lifting, but good information still needs to go in.
The correct GST treatment needs to be applied to transactions, so getting the initial setup, tax rates and bookkeeping processes right will be important.
Good software + good setup + good bookkeeping = much easier GST reporting.
What records will I need to keep?
GST-registered businesses will need sufficient records to support the figures included in their GST returns.
That means good sales and purchase records will become even more important.
If receipts are currently living in gloveboxes, handbags and random email inboxes, GST might finally be the incentive to sort that out!
Digital tools such as Xero and Dext can make capturing and storing this information much easier.
How often will I have to submit a GST return?
The current framework is for quarterly GST returns, filed online.
The return is expected to include information such as taxable and zero-rated sales, purchases, imports, GST collected and GST paid.
For businesses with their bookkeeping up to date, much of that information should already be sitting within the accounting system.
What about my invoicing?
GST-registered businesses will need to make sure their invoices capture the information required under the new rules.
For businesses using Xero or another modern invoicing system, this should largely be a setup exercise rather than a whole new invoicing process.
We’ll update this FAQ when the final invoice requirements are confirmed.
What about cash flow?
This is worth thinking about early.
GST you collect from customers isn’t additional business income. Some of it will ultimately need to be paid across to Revenue after deducting eligible GST you’ve incurred.
Keeping your bookkeeping up to date will help you know what you’re likely to owe rather than getting a surprise at the end of the quarter.
The slightly trickier stuff
What happens with imports and purchases from overseas?
Imports form part of the GST system too, and the proposed GST return includes reporting of the value of imports.
The practical treatment can depend on whether a business is GST registered and on the type of transaction, so this is an area where businesses importing goods should pay particular attention to the detailed guidance.
What about commercial property and rent?
Property can be one of the more complicated areas of any GST system, and commercial landlords have been identified as a sector requiring specific engagement as the Guernsey system is developed.
Commercial rent is proposed to be standard-rated. However, a smaller landlord who is below the registration threshold may not be GST registered and therefore would not charge GST.
If you are a landlord, tenant, developer or property business, the impact will depend on your circumstances, so we’d suggest keeping an eye on the detailed guidance as it develops.
What is ISE, and does it affect my business?
You may also hear about ISE, or International Services Entity, as part of the GST system.
ISE is designed mainly for certain businesses providing international services, particularly in Guernsey’s finance sector. Instead of operating normal GST accounting on all of their activities, qualifying businesses can pay an annual ISE fee and receive a different GST treatment.
For most local SMEs, you won’t be an ISE yourself. You’ll follow the normal GST rules, including registering if you exceed the registration threshold or choosing whether to register voluntarily if you’re below it.
However, ISE can still matter to you if one of your customers is an ISE.
For example, if you’re a local accountant, IT company, marketing agency, cleaner or other supplier providing services to an ISE business, you still need to consider the normal GST treatment of your sale. Your customer being an ISE doesn’t automatically mean you don’t charge them GST.
So the simple message for most SMEs is:
Don’t worry about becoming an ISE unless you operate in one of the qualifying sectors. But don’t assume an ISE customer means your invoice is GST-free either.
The detailed ISE rules, eligibility and treatment will be important, so we’ll update this FAQ as the implementation guidance is finalised.
What about deposits, credit notes, refunds and bad debts?
These are all normal parts of running a business, so the GST rules will need to cater for them.
The important thing will be making sure your accounting and invoicing processes deal with them correctly.
Can I reclaim GST on everything I buy?
Don’t assume so.
The ability to reclaim GST will depend on the rules, the nature of the purchase and what it is being used for.
This is one of the areas where detailed guidance will be important, particularly for businesses carrying out a mixture of taxable and exempt activities.
GST should also be clear on your invoice, and using software like Xero & Dext will help with the capture of the GST expense.
Getting ready
Are payroll and Social Security changing too?
Yes. GST forms part of a wider tax reform package, which also includes changes to Social Security.
For employers, that means payroll systems and providers will need to be ready for the new contribution structure and rates.
The good news is that businesses using supported payroll software shouldn’t be sitting there manually calculating everyone’s contributions. The key will be making sure your payroll system is updated and ready before the changes take effect.
Does being under the GST threshold mean I can ignore all of this?
Probably not.
Even if you don’t register, GST could affect the prices you pay suppliers, your margins, competitors’ pricing and decisions about whether voluntary registration makes sense.
You may have less administration, but it’s still worth understanding how GST affects your particular business.
What should I be doing now?
Don’t panic and don’t start rebuilding everything!
But there are some sensible things businesses can do:
Understand whether you’re likely to need to register, consider whether voluntary registration might make sense, make sure your bookkeeping is up to date, check whether your accounting and other business systems will cope with GST, and start thinking about pricing, margins and cash flow.
Talk to your accountant and start thinking about if you will need to make changes to processes, systems etc. It maybe you will get other benefits from this too, e.g. a system like Xero can reduce so much everyday admin, far outweighing the additional GST element.
There is time to get ready. The trick is not leaving everything until the last minute.
How can DNA help?
You might need lots of help. You might need hardly any.
We can help businesses with things such as:
GST registration and voluntary registration decisions, Xero setup and GST readiness, bookkeeping and record keeping, training, payroll, pricing and margin modelling, and understanding what the changes mean for your particular business.
And if you already do everything yourself and simply want someone to show you what needs changing, we’re very happy to do that too.
Our aim isn’t to make GST complicated. It’s to help businesses get the right systems and processes in place so that, once it arrives, it becomes part of business as usual.
Got a GST question we haven’t answered? Ask us.
We’re building this FAQ around the questions Guernsey businesses are actually asking, so send us your sensible questions and we’ll keep adding to it.
There are no silly questions. GST will be new for all of us, and we’d much rather businesses ask now than struggle with it later.
