8

Question 1

How is VAT charged

Answer 1

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.

Question 2

What is output tax

Answer 2

VAT received on sales

Question 3

What is input tax

Answer 3

VAT suffered on purchases

Question 4

Is there distinction between capital and revenue expenditure for VAT

Answer 4

No. 

There are certain items outside scope of VAT

Question 5

When is VAT charged

Answer 5

When a taxable person makes taxable supply of goods or services in course of business

Question 6

What is a taxable person

Answer 6

Individual, partner, company, charity or club/society

Question 7

What is course of business

Answer 7

Not necessarily profit, just a supply for consideration

Question 8

What are taxable supplies

Answer 8

Any supply of goods or services in UK unless specifically exempt

Question 9

What are the VAT rates

Answer 9

Standard – 20%
Reduced – 5%
0 L – 0%

Question 10

What is supply of services

Answer 10

For consideration – any supply not of goods includes temporary private use of goods owned by business, private use of services supplied to business

Question 11

When does supply of goods occur

Answer 11

When ownership passes/consideration. Also includes gifts business assets and goods taken permanently for private use by owner

Question 12

What is exempt supplies

Answer 12

Supplier cannot register, or reclaim VAT suffered

Question 13

What is the value of a supply

Answer 13

Amount on which VAT charge is based

Question 14

What is consideration given for supply

Answer 14

Total value of supply plus VAT

Question 15

What is trade discount

Answer 15

Given before sale takes place and therefore invoiced amounts and VAT calculation is after deducting discount

Question 16

What is early settlement discount

Answer 16

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

Question 17

What is the time of supply tax point

Answer 17

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

Question 18

What can the basic tax point be replaced by

Answer 18

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.

Question 19

The actual tax point cannot be done later than what date

Answer 19

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

Question 20

What tax point are goods supplied on a sale or return basis treated as having

Answer 20

Basic tax point 

Question 21

When is registration needed

Answer 21

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

Question 22

What is artificial splitting of businesses 

Answer 22

Some traders may try to avoid registration by splitting into smaller parts

Question 23

Why would a trader make a voluntary registration 

Answer 23

To make business seem more prestigious
Business has mostly zero rated supplies

Question 24

When is there exemption from registration

Answer 24

If supplies 0 rated

Question 25

What is pre-registration input tax

Answer 25

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

Question 26

When Is deregistration voluntary

Answer 26

If trader can satisfy customers that supplies in next 12 months will be less than £83,000

Question 27

When is deregistration compulsory

Answer 27

When a trader ceases to make taxable supplies and when there is a change in legal status

Question 28

On deregistration, what happens if trader doesn’t sell business as a going concern

Answer 28

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

Question 29

How is accounting for VAT now done

Answer 29

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.

Question 30

What are tax invoices

Answer 30

Provides documentary evidence of transaction. Retailers may issue less detailed invoice if for less than £250

Question 31

For how long must accounting records be retained for

Answer 31

6 years and are subject to control visits by customs

Question 32

What are the types of special schemes

Answer 32

Annual accounting
Cash accounting
Flat rate for small businesses
VAT