25. VAT outline Flashcards
What taxable supplies are exempt? (6)
- Insurance
- Land
- Postal services
- Financial services
- Funeral services
- Education
Explain the historic method for determining compulsory registration including any dates/deadlines
Total taxable supplies for last 12 months. IF exceeds £85,000, must register for VAT
- Must notify HMRC within 30 days of exceeding the threshold
- Changes effective from 1st of the 2nd month following exceeding threshold
Explain the future method for determining compulsory registration including any dates/deadlines
Consider total taxable supplies over following 30 days. If expected to exceed £85,000, must register for VAT.
- Must notify HMRC within 30 days of exceeding the threshold
- Changes effective from date of exceeding limit
Why would a company want to voluntarily join the VAT scheme? (3)
Why might they not? (2)
Why they would:
- Appear larger
- Recover input VAT
- Avoid penalties
Why they wouldn’t
- Increased price to customers
- Increased admin.
How far can you backdate VAT recovery prior to registration? What is this dependent on?
Goods: can relieve input VAT on goods for business still held and acquired in previous 4 years
Services: can relieve input VAT on services for business used in previous 6 months
Advantages and disadvantages of VAT groups: 2 of each
+ No VAT on intra-group supplies
+ Only one VAT return to be completed
- Joint liability
- Complex to prepare return
Explain the method of compulsory deregistration and any relevant dates/deadlines.
Have to deregister when no longer selling taxable supplies.
- Notify HMRC within 40 days
- Effective from date ceasing to trade
Explain the method of voluntary deregistration and any relevant dates/deadlines.
If turnover is believed to be less than £83,000 in next 12 months, dereg. can be effective from date of request
What occurs on deregistration?
Total input VAT on all non-current assets and inventory held at this date to form input tax liability.
If less than £1,000, liability waived.
What conditions have to be met fort the sale of a business to not be treated as a vatable asset? (4)
- Business needs to be transferred at a going concern
- No significant break in trading
- Same type of trading to be carried on after the transfer
- New owner is or is liable to register for VAT
What are the rules for determining the tax point of VAT?
Basic tax point: date made available to customer
If tax invoice issued within 14 days of good despatch, this becomes actual tax point.
If tax point has been issued or payment received before basic tax point, this becomes the earlier date.
What are the two exceptions to the tax point rules?
How do they differ?
Goods on sale or return: earlier of:
- point at which they can no longer return goods
- 12 months after despatch
Continuous supplies: earlier of:
- date of tax invoice
- date payment is made
How does output VAT work on discounts?
Done on discounted price
How does output VAT work on gifts?
Exceptions? (2)
Output VAT done on replacement value, except:
- goods less than £50 in 12 months
- trade samples
How does output VAT work on motor expenses?
Dependent on whether driver reimburses.
- Driver reimburses for personal use: output VAT payable on amount.
- Driver does not reimburse: output VAT on scaled rate (will be given in question)
