2.4 Taxation - VAT Flashcards
How is VAT charged?
1) Taxable person
- Individual/Partnership/Co/Charity
- Independently carries out in any place any economic activity (furtherance of business > consideration for supply/’for remuneration’ (obtain income on continuing basis))
2) Sold/Leased goods/services to Buyer
- Standard/Reduced/Zero-rated rate > Taxable supply > Full sale price (NOT amount charged to Buyer) > VAT
What is input/output income?
Input outcome
- Co collects VAT from sales/purchases
Output income
- Co pays VAT to HMRC on quarterly basis
How should VAT records be maintained?
Co maintains records > Offset vs output VAT figures
How should VAT invoices be issued?
Submit VAT returns online
Pay VAT electronically
- Gives Cos max. +7 calendar days to pay
- Standard due date > 1 month after end of VAT period
What are the VAT rates?
Standard rate (default) > 20%
- Goods
- UNLESS specified as reduced/zero/exempt
Reduced rate > 5%
- Domestic fuel
- Children’s car seats
Zero-rated > 0%
- Food
- Books
- Children’s clothes
Exemptions
- Insurance
- Education
- Training
- Fundraising events
- Non-business activities
What is the tax point?
Date when transaction took place > VAT purposes
Co transferred goods/performed services to customer > Basic tax point
- Actual tax point (before basic tax point) > Invoice issued/Payment received
- Actual tax point (after basic tax point) > Invoice issued (within 14 days/date of physical supply)
Co performed services to customer > Continuously
- Basic tax point > Payment regularly/time to time OR Invoice issued
What is required for VAT registration?
1) Trader
- Turnover of taxable supplies within UK within last 12 months exceeds £85,000
- Trader has reasonable grounds believing within next 30 days turnover of taxable supply exceeds £85,000
2) HMRC registration
- Within 30 days
- Registered date > When Trader realised turnover exceeds £85,000 (NOT actual date it exceeds it)
- Can de-register below £85,000 => Value must be below £83,000 pa
