15: VAT - More Flashcards
When and how is VAT paid?
Both a return is submitted and payment is made same day -
- one month and seven days after the end of the quartee.
Must pay and submit returns electronically.
Return: VAT100.
Periods are normally three months long.
HMRC can issue an assessment stating how much VAT they think is due.
How does electronic payment change the payment date?
Add another 3 days on! (So one month and 10 days)
How do substantial traders work?
Have a VAT liability over 2.3mil per annum
Must make payments on account
1/24th of the PY’s tax liability is due on months 2 and 3 of a quarter
The remaining amount of the quarter is due one month after that quarter ends
What are the three schemes you have to know about for VAT?
Annual accounting scheme
Cash accounting scheme
Flat rate scheme
How does the annual account scheme work?
1 tax return; within 2 months of the end of the trading year
Payments are either:
9 payments, end of the months 4 - 12
10% of the previous year’s liability
3 payments, end of months 4, 7, 10
25% of the previous year’s liability
Balancing payment made when the return is filed
Advantages and disadvantages of Annual accounting scheme?
Advantages:
- one return helps burden of admin
- extra month to submit return and balancing payment
- regular fixed payments help budgeting
Disadvantages
- not suitable for businesses with declining taxable turnover
- not possible for zero-rated businesses
What is the cash accounting scheme and what are its advantages and disadvantages?
Tax point is receipt and payment of cash, nothing to do with invoices
Advantages
- businesses selling on credit get longer
- automatic bad debt relief
- can be used with annual accounting scheme
Disadvantages
- delays recovery of input tax
- not suited for cash sales or zero rated businesses
How do you join or leave the annual or cash schemes?
Turnover must be no more than the turnover threshold
Also must be up to date with returns and payments, and must have no VAT offences within last 12 months
Can remain until taxable turnover from previous 12 months have exceeded the threshold
What are the two things that one must do under MTDfB?
Keep their records digitally
Provide their VAT return through MTD compatible software
What does a VAT invoice have to have?
ID number
Business name, address and contact info
Name and address of customer
Clear description of the goods or service
Date of the invoice and tax point
Price, quantity and VAT rate for each item
Any discount offered
Amount charged exc. VAT
Total VAT charged
When can different invoices be supplied?
Simplified invoice can be sent if it is for less than £250 inc VAT
Modified invoice can be sent for retail supplies over £250
What is the flat rate scheme?
Total turnover (VAT inclusive) x flat rate %
You will be given the rate
Total turnover includes:
- zero rated supplies
- exempt supplies
- supplies of capital assets
VAT invoices still issued as normal
No input VAT records need to be recorded (except for some assets over £2000)
Advantages and disadvantages of a flat rate scheme?
Advantages
- lower admin burden
- possibly less VAT
- can be used with annual scheme
Disadvantages
- not suitable for zero rated businesses
- not suitable for businesses with high input tax
How to join and leave the flat rate scheme
Dont hit the turnover limit (exc vat)
Stay in it, dont hit the turnover limit to leave with your annual income!
What is a net VAT errors?
The total under declaration of VAT less the total over declaration
Add them together!!
