5. VAT Flashcards
Compulsory registration
- threshold
- type of supplies
- £85,000
- Taxable supplies = zero rated, reduced and standard rated
Two types of test we can use for compulsory registration
- Future tests
- Historic test
Historic test
1. Period
2. Notify
3. Registered from
- Look back 12 months
- on last day of each month - Within 30 days of the end of the month the thr exceeded
- 1st day of the second month after taxable supply exceeded thr
Or
An agreed earlier date
Future test
1. Period
2. Notify
3. Registered from
- Look forward everyday At next 30 days taxable supplies in isolation
- By end of 30 days period in which threshold is expected to be exceeded
- Start of 30 day period
Advantages of registration
- recoverable input VAT
- Avoids penalties for late registration
- perception of business
- if zero rates supplies = VAT repayable
Disadvantages
- administration
- must charge VAT
= OK if customers are VAT registers
= Less competitive if customers are public / non registered business
Pre registration input VAT for goods, recoverable if :
- acquired in 4 years pre registration
- still held at registration
Pre registration input VAT for services , recoverable if :
Acquired in 6 months lee registration
When is VAT deregistration
1. Compulsory
2. Notify
3. Deregistered from
- Cease to make taxable supplies
- Notify within 30 days of ceasing supply
- Deregistered from date of cessation
When is Deregistration
1. Voluntary
2. Notify
3. Deregistered from
- If expected taxable supplies in the next 12 months is less than £83k
- Notify any time
- Deregistered from
- date of request, or
- an agreed later date
What’s the consequences of deregistration
- VAT on deemed supply of all stocks and business assets in hand at date of deregistration
- no charge if less that £1k.
Whats the VAT implication on transfer of business as a going concern ( TOGC )
Not a taxable supply
What are the conditions of transfer of business as a going concern ( TOGC ) not to be a taxable supply
- sold as a going concern
- no significant break in trading
- same type of trade being carried on
- new owner is, or will become, VAT registered
Whats the VAT consequences on transfer of business as a going concern ( TOGC )
- no VAT charged on actual TOGC
- person transferring = must Deregister OR make joint election for the transferee to take over VAT registration
- if joint election made = transferee inherits VAT liabilities of transferor
What type of land and buildings are zero rated VAT
Buildings for residential and charitable use
- sales and leases
What type of land and buildings are standard - rated VAT
- New commercial construction
- Sale of freehold commercial buildings less than 3 years old
What type of land and buildings are VAT exempt
Everything else
- but can opt to tax
( I.e waive the expemption)
Sale of old commercial building older than 3 years
What are the conditions for opting to tax exempt VAT land and buildings
- elections filed within 30 days of signing
- cooling off period = 6 months
- irrevocable thereafter for 20 years
- separate election for each property
What are the impacts of opting to tax exempt VAT land and buildings
- taxable at standard rate
- input VAT can be recovered
- future sale / rent of building = taxable at standard rate
- new owner not bound by election= but can elect to opt to tax in the future
What does capital hood scheme apply to
- partially exempt traders, and
- after purchase of certain items = the % of exempt and % taxable proportions changes
Calc : What’s the capital good scheme annual adjustment
Total input VAT
X ( years remaining of adjustment period / 10 or 5 years)
X ( now % - original % )
What type of items in scheme for capital good scheme
- Land and buildings
- Computers
capital good schemes for land and buildings, what’s the:
1. Value
2. Adjustment period
- Over £250,000
- 10 years
- 5 years if lease is less than 10 years
capital good schemes for computers , what’s the:
1. Value
2. Adjustment period
- Over 50k
- 5 years
For capital good scheme what’s the remaining adjustment period % if disposable is of a :
1. Taxable supply
2. Exempt supply
- Taxable supply = 100% taxable use
- Exempt supply = 0% taxable use
What’s the benefit of passing the de minimis test
All input VAT for partial taxable businesses = recoverable
De minimis test : What’s test 1
- Total input tax is less than £625 per month on avg, AND
- Value of exempt supplies is less than 50% of total supplies
De minimis test : What’s test 2
- Total input tax less input tax directly attributable to taxable supplies = less than £625 per month on avg, AND
- Value of exempt supplies is less than 50% of value of total supplies
De minimis test : What’s test 3
Total irrecoverable input VAT is:
- less than £625 per month on avg
- less than 50% of total input VAT
What’s the VAT on goods exported overseas
Zero- rated supplies.
How do you deal with VAT on goods imported from overseas
= tax neutral
= postponed accounting system
- output VAT at 20% accounted by importer
- input VAT suffered can be reclaimed in same return
If UK business receives services from overseas business , what’s the:
1. Place of supply
2. VAT implication
- UK
- Reverse charge procedure
- output vat 20% accounted for
- reclaim as input VAT
If UK business supplies services to overseas non - business customer , what’s the:
1. Place of supply
2. VAT implication
- UK
- Output VAT charges at 20%
If UK business supplies services to overseas business customer (B2B) , what’s the:
1. Place of supply
2. VAT implication
- Overseas
- Outside scope of VAT
Where is the VAT charged when supplying services
Charges in place of supply
Where is the VAT charged if the place of supply is
1. Business to business
2. Business to non-business
- Where the customer is established
- Where the supplier is established
