8 Flashcards
How is VAT charged
At each stage of production and is borne by final consumer. Each registered trader deducts registered VAT suffered from VAT received and pays net amount.
What is output tax
VAT received on sales
What is input tax
VAT suffered on purchases
Is there distinction between capital and revenue expenditure for VAT
No. 
There are certain items outside scope of VAT
When is VAT charged
When a taxable person makes taxable supply of goods or services in course of business
What is a taxable person
Individual, partner, company, charity or club/society
What is course of business
Not necessarily profit, just a supply for consideration
What are taxable supplies
Any supply of goods or services in UK unless specifically exempt
What are the VAT rates
Standard – 20%
Reduced – 5%
0 L – 0%
What is supply of services
For consideration – any supply not of goods includes temporary private use of goods owned by business, private use of services supplied to business
When does supply of goods occur
When ownership passes/consideration. Also includes gifts business assets and goods taken permanently for private use by owner
What is exempt supplies
Supplier cannot register, or reclaim VAT suffered
What is the value of a supply
Amount on which VAT charge is based
What is consideration given for supply
Total value of supply plus VAT
What is trade discount
Given before sale takes place and therefore invoiced amounts and VAT calculation is after deducting discount
What is early settlement discount
VAT charged on amount that customer pays. What is shown on invoice will depend on with a business expects customer to take advantage of discount and a credit note will be prepared if taken. If business expects customer to take advantage of discount, invoice will show discounted price and VAT will be calculated on this discounted price. Full price will also be shown. If customer doesn’t pay in time to take advantage of discount, new invoice will be needed to charge increase of sale and VAT
What is the time of supply tax point
Used to determine rates and tax period. Basic tax point is that when goods are moved or made available to customer or date on which services are completed
What can the basic tax point be replaced by
Actual tax point which may be before or after basic tax point. Payment received before basic tax point, actual tax points date of payment. Invoice issued before basic tax point, actual tax point is date of invoice. Invoice issued within 14 days of the basic tax point.
The actual tax point cannot be done later than what date
Date on which payment is actually received. If deposit is paid, creates its own tax point and there will be separate tax points for deposit and balancing payment
What tax point are goods supplied on a sale or return basis treated as having
Basic tax point 
When is registration needed
When supplies in a 12 month period exceed £85,000 and then a VAT number will be issued and this must be quoted on all future tax invoices. Trader must notify customs within 30 days in end of month in which limit is reached/exceeded
What is artificial splitting of businesses 
Some traders may try to avoid registration by splitting into smaller parts
Why would a trader make a voluntary registration 
To make business seem more prestigious
Business has mostly zero rated supplies
When is there exemption from registration
If supplies 0 rated
What is pre-registration input tax
VAT suffered on purchases can be reclaimed from customs in certain circumstances;
Goods – VAT suffered on goods purchased in 4 years prior to registration if they have not been sold or consumed before registration
Services – VAT suffered on services supplied in 6 months before date of registration
When Is deregistration voluntary
If trader can satisfy customers that supplies in next 12 months will be less than £83,000
When is deregistration compulsory
When a trader ceases to make taxable supplies and when there is a change in legal status
On deregistration, what happens if trader doesn’t sell business as a going concern
Trader is deemed to have made supply of all tangible assets of business and must account for VAT accordingly. Any assets on which VAT was not claimed can be excluded and VAT in this circumstance is not collected if it’s £1000 or less
How is accounting for VAT now done
Via Internet. Return needed normally every 3 months, due 1 month and 7 days after end of quarter. If output VAT is greater than input VAT, pay to customs. Input tax is greater than output tax, reclaim from customs. Businesses with mostly zero rated supplies do monthly return submissions.
What are tax invoices
Provides documentary evidence of transaction. Retailers may issue less detailed invoice if for less than £250
For how long must accounting records be retained for
6 years and are subject to control visits by customs
What are the types of special schemes
Annual accounting
Cash accounting
Flat rate for small businesses
VAT
