4.2 Taxation - VAT

Question 1

What is zero-rated VAT? When does it apply?

Answer 1

VAT (0%) => Essential products

• Baby food
• Sanity products

Question 2

What is exempt VAT? When does it apply?

Answer 2

NO VAT => Residential transactions

NO VAT => Commercial transactions (lease/assignment/conveyance)
- Property > 3yo => UNLESS opt to tax on leases

Question 3

What is VAT standard rate? When does it apply?

Answer 3

VAT (20%) => Commercial transaction (property < 3yo)

VAT (20%) => Taxable supply

• Co sells good/services to Customers > Co can collect VAT (output tax)
• Co receives goods/services from Suppliers > HMRC can collect VAT (input tax) (BUT Co could recover VAT)

Question 4

How may Seller waive exemption to VAT?

Answer 4

‘Opt to tax’

1) Register for VAT
2) Serve written notice => HMRC (within 30 days of waiver)
3) Check if VAT charged in lease
- If silent + waiver ‘after’ lease entered => Landlord can charge VAT on rent
- If silent + waiver ‘before’ lease entered => NO VAT charged (already included in rent) (HMRC can charge VAT on Landlord)

=> Offsets input tax vs output tax

• UNLESS Tenants not registered for VAT
• UNLESS Cos are zero-rated (banks, insurance companies) > NO VAT charge on output tax => NO VAT charge on input tax

Question 5

What is the position of VAT by Standard Commercial Property Transactions (SCPC) of Sale?

Answer 5

Part 1
- S warrants sale of property as NOT chargeable supply

Part 2

• A1: Sale of property as chargeable supply
• A1.3: S may charge VAT on purchase price => B can collect proper VAT invoice
• A2: S sells property as transfer of going concern => S warrants lease to produce rental income