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R3 > CH 8 - VAT & Corporation Tax > Flashcards

CH 8 - VAT & Corporation Tax Flashcards

1
Q

What is VAT charged on?

A

Taxable goods and services in the UK and purchases in EU

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2
Q

Services are treated as being supplied in which country?

A

Where the customer is situated

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3
Q

Who administers VAT?

A

HMRC

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4
Q

What are the different rates of VAT?

A
  • Zero
  • Reduced rate 5%
  • Standard rate 20%
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5
Q

Name some supplies that are exempt from VAT?

A
  • Insurance
  • Finance
  • Health
  • Education
  • Burial and cremation services
  • Leases and sales of commercial land and buildings that are more than 3 years old
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6
Q

What is output VAT charged on?

A

VAT traders charge customers output VAT on taxable supplies of goods and services

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7
Q

What is input VAT?

A

The VAT the trader paid for the goods and services purchased (can be offset against output VAT they owe)

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8
Q

What VAT input cannot be reclaimed?

A

Purchasing cars and business entertainment purposes

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9
Q

When must a trader register for VAT?

A

Taxable supplies more than £85,000 in previous 12 months

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10
Q

When must a trader notify HMRC that the £85k limit was exceeded?

A

Within 30 days of the end of the month in which limit was exceeded

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11
Q

When is a trader VAT registered?

A

From the 1st day of the 2nd month after exceeding limit

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12
Q

If a trader is expecting to exceed £85k limit within next 30 days, what must they do?

A

Notify HMRC before end of 30 day period

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13
Q

Can a trader with low level of taxable supplies voluntarily register for VAT?

A

Yes

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14
Q

When can a trader deregister for VAT?

A

When taxable turnover falls below £83,000

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15
Q

Give examples of zero rated supplies

A
  • Most food and some drinks (except catering, restaurants etc)
  • Domestic supplies of water and sewerage
  • Books and publications
  • Sales of new residential buildings, buildings used by charities and renovated houses that have been empty for 10 years or more
  • Supplies of services by contractors, when constructing new residential buildings or buildings for charities
  • Public transport
  • Drugs, medicines and aids for the disabled
  • Clothing/footwear for children
  • Women’s sanitary products
  • Exports of goods and certain services to non-EU countries
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16
Q

Give examples of reduced-rate supplies (5%)

A
  • Fuel for domestic use or non-business by a charity
  • The installation of energy-saving materials
  • Contraceptive products
  • Children’s car seats
  • Mobility aids for the elderly
  • Smoking cessation products
  • Certain property renovations/conversions
  • Certain supplies of hospitality
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17
Q

Give examples of reduced-rate supplies (5%)

A
  • Fuel for domestic use or non-business by a charity
  • The installation of energy-saving materials
  • Contraceptive products
  • Children’s car seats
  • Mobility aids for the elderly
  • Smoking cessation products
  • Certain property renovations/conversions
  • Certain supplies of hospitality
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18
Q

Give examples of reduced-rate supplies (5%)

A
  • Fuel for domestic use or non-business by a charity
  • The installation of energy-saving materials
  • Contraceptive products
  • Children’s car seats
  • Mobility aids for the elderly
  • Smoking cessation products
  • Certain property renovations/conversions
  • Certain supplies of hospitality
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19
Q

When can a partially exempt business reclaim its input VAT?

A

If total value of exempt input VAT is not more than:

  • £625 p/mo
  • Half of its total input
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20
Q

Traders that make taxable supplies of £1.35m or less can do what?

A
  • Use cash accounting

- Can elect to complete annual return

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21
Q

How does the cash accounting method affect when output VAT is due?

A

Due when customer pays, not when item is sold

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22
Q

When can a trader use cash accounting until? (taxable turnover amount)

A

£1.6m

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23
Q

What is the Flat Rate Scheme?

A

Allows small businesses to account for VAT as % of taxable turnover (simplifies calculations)

24
Q

What is the flat rate % for limited cost traders/businesses?

A

16.5% applies to limited cost traders

25
Q

What is the maximum annual turnover to qualify for the Flat Rate Scheme?

A

£150,000

26
Q

What is the flat rate calculated on?

A

business’s sales plus the VAT (120%)

27
Q

What is a margin scheme?

A

Used for second hand dealers - VAT is due on difference between price paid/price sold for

28
Q

What is the rate of VAT for margin scheme?

A

16.67% on difference between price bought/sold

29
Q

Normally, VAT returns are submitted and paid how often?

A

Every 3 months

30
Q

Traders that regularly reclaim VAT can submit returns how often?

A

monthly

31
Q

What is the MTD programme?

A

Software for providing VAT returns digitally

32
Q

Returns must be submitted by when under MTD?

A

By the 7th day of the month after the month following the VAT period

33
Q

What is bad debt relief?

A

Account for VAT at date the sale takes place (tax point) - if customer doesn’t pay then no immediate relief for trader

34
Q

When does a customer pay VAT on EU imported goods?

A

Customer accounts for tax on their next returns (enter output VAT figure)

35
Q

What three things are corporation tax payable on?

A

Company’s trading profits, investment income and chargeable gains

36
Q

Are dividends from other companies included in corporation tax calculations?

A

No

37
Q

Corporation tax rates are set for what period?

A

Full financial year 1st Apr - 31st March

38
Q

What is the rate of corporation tax?

A

19%

39
Q

What happens if a company’s accounting period straddles two financial year’s?

A

Profits apportioned

40
Q

Accounting periods cannot be longer than what for corporation tax?

A

12 mo

41
Q

What are the stages of calculating corporation tax?

A

1) Calculate tax adjusted trading profit (net profit + non deductible expenses - non trading income - tax allowances/trading losses)
2) Add income from other sources and chargeable gains
3) Deduct any reliefs

42
Q

Loss relief can be claimed and then carried forward for how many years?

A

Claimed within 2 years from loss-making period and carried forward indefinitely

43
Q

Losses must be set against the current year/previous year in which order?

A

Current year first before carrying back

44
Q

Loss relief is restricted when profits exceed what?

A

£5m

relief restricted to £5m + 50% of profit over £5m

45
Q

Gains and losses are calculated according to what rules?

A

CGT rules (but not paid as separate tax)

46
Q

Indexation allowance was calculated on gains up to which date?

A

Dec 2017

47
Q

Chargeable losses cannot be offset against what?

A

Trading profit or investment income (but can be set against chargeable gains)

48
Q

When is corporation tax due?

A

Due and payable 9 months and 1 day after end of accounting period

49
Q

When is the corporation tax return due?

A

12 months after end of accounting period

50
Q

Large companies with a profit over £1.5m must make their VAT returns, how often?

A

Quarterly

51
Q

Are payment of a dividends to shareholders a deductible expense?

A

No - paid from post-tax profits

52
Q

What is a close company?

A

Controlled by 5 or less shareholders or by only its shareholder-directors

53
Q

What is the tax charge on loans by close companies to properieter/participants?

A

None

54
Q

Are all companies that are UK residence liable to UK corporation tax?

A

Yes

55
Q

Companies incorporated overseas are classed as UK resident if what?

A

Central management and control takes place in the UK

R3 (10 decks)

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