1. Intro to VAT Flashcards
Registration
Annual taxable turnover exceeds registration limit set annually by the government (£85K in Finance act 2019)
Set in April 2017 unchanged in 04/18 and 04/19
Must apply within 30 days of the end of the 12 months.??? Not sure. **NB 30 days Not ‘EOM’!!!
**Remember to only count taxable supplies … include zero-rated but not exempt*
For the previous 12 months … if turnover exceeds or is likely to exceed in next 30 days … or if turnover in next 30 day period alone is expected to exceed 85K …must register to become a ‘taxable person’
Vat is a tax…
..on the final consumer
Uk vat rates are ?
Standard 20%
Reduced (eg domestic fuel or power) 5%
Zero rate 0%
Zero rated ... taxable but Government decided no tax shd be charged, normally essential household spending and to tax would burden less well off. Food in shops but not restaurants Young children’s clothes and shoes Transport - eg bus and rail fares Newspapers magazines and PRINTED books
Also there are goods and services outside scope of vat (eg motorway tolls and charitable donations) - these are ‘Exempt’ supplies.
Zero rated
Zero rated … supplier can reclaim input tax (eg publisher)
goods are taxable but Government decided no tax shd be charged, normally essential household spending and to tax would burden less well off.
Food in shops but not restaurants
Young children’s clothes and shoes
Transport - eg bus and rail fares
Newspapers magazines and PRINTED books
Exempt
Zero-rated are chargeable - at 0%
Exempt are not chargeable at all.
Supplier who supplies ONLY exempt goods/services CANNOT reclaim input tax.
Health and dental care.
Education & training.
Betting & gambling.
Burials & cremations.
VAT info - keep knowledge current
VAT guide (notice 700) available on gov.uk
Attend CPD organised and run by professional accounting bodies.
Read relevant articles in journals and mags.
Must apply to register (within 30 days) if taxable supplies have exceeded or are likely to exceed the annual limit.
Penalties?
Can be fined. Because failing to collect tax due to HMRC.
(HMRC would lose tax only on the suppliers margin… because they wouldn’t be reclaiming VAT either…. in effect they become the end of the chain instead of the consumer)
Suppliers of zero-rated goods are included in the registration regulations but can apply for exemption from registration.
However this is unlikely as they then lose the right to reclaim input tax !!!!
.
If not registered when should have… ?
HMRC will treat as if registered on time.
Business must then absorb the VAT which should have been charged.
Or
Account for it in addition to charges already invoiced and attempt to recover from customers. (Difficult to administer and customers not obliged to pay)
There are profitable businesses that failed to register and were bankrupted by the VAT demand after HMRC discovered
Taxable ‘person’ … is wide ranging and includes ..
Sole proprietors Partnerships Limited companies Clubs and associations Charities Any other organisation or group of ppl acting together under a particular name eg. An educational establishment
Taking over a going concern…
Basically if the total of your turnover and the business you are taking over exceeds threshold then you must be registered from day business transferred to you.
Exemption from registration…
Turnover may exceed but be temporary eg a one-off sale.
If business can prove that it’s a true one-off and value of taxable supplies will not go over the deregistration threshold (£83K in 2019 Finance act) in next 12 months it can apply not to register for VAT
NB if it doesn’t notify within 30 days cannot request exemption…. must register and then apply to deregister
A business or not a business?
Only a business can register and become a ‘taxable person’
- earns an income by carrying out a trade, vocation or profession.
- provides membership benefits as a club or association for subscription.
- carries out activities as a charity or other non-profit body.
Must be regular and over a period of time.
Therefore excludes hobbies even if buying and selling. Selling belongings eBay or boot sale.
Non-registered businesses
Not being registered can be an advantage in being more competitive. .. although trader cannot reclaim VAT on supplies.
Many small traders such as plumbers and electricians who sell skills may therefore benefit.
Voluntary registration….
May be beneficial if sells zero-rated goods such as children’s books or clothes…
.. may be poss to reclaim on purchases up to 4 years backdate and 6 months for services.
ONLY WORKS FOR SUPPLIER OF ZERO-RATED …
..if VAT-EXEMPT goods CANNOT RECLAIM
