Chapter 1 Flashcards

1
Q

Define VAT

A

A tax on the sale of goods and services

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2
Q

Is VAT a direct or indirect tax ?

A

Indirect

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3
Q

What government body collects and regulates VAT?

A

HMRC

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4
Q

What is the current VAT threshold for businesses in the UK?

A

£85,000

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5
Q

Is VAT charged on services / goods supplied Output or Input tax?

A

Output

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6
Q

Is VAT charged on services / goods received Output or Input tax?

A

Input tax

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7
Q

What is the historic turnover test ?

A

When at the end of any month taxable supplies over the past 12 months has exceeded the VAT threshold (£85,000) the business must notify HMRC within 30 days of the end of the month the threshold was exceeded

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8
Q

What is the future turnover test ?

A

When annual turnover is expected to exceed the VAT threshold the business must register in the next 30 days

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9
Q

What are the VAT rules in relation to buying a business?

A

If the total of your turnover and the business your buyings turnover exceeds the threshold you must be registered for vat from the day the business is transferred to you

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10
Q

Who can register for VAT?

A

Only a business can register for VAT and become a taxable person

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11
Q

What are the benefits of not being a VAT registered business ?

A

You will have more competitive prices as you won’t have to Integrate vat into the total price

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12
Q

Why may a business voluntarily register for VAT ?

A

If they can claim on the input VAT but don’t have to pay any output VAT ( selling zero rated items )

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13
Q

What type of businesses can’t register for VAT ?

A

Businesses that only sell VAT exempt goods

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14
Q

How long does HMRC require businesses to keep their financial records for?

A

6 years

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15
Q

VAT is a tax on consumer ____________ ?

A

Expenditure

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16
Q

When must a business become VAT registered by law ?

A

When they pass the registration threshold (currently £85,000)

17
Q

VAT is a tax that is ultimately paid by the _____________ ?

A

Final consumer

18
Q

What might happen to a business that doesn’t register for VAT when it should have ?

A

It may face a civil penalty for failure to notify.

19
Q

If a business is not registered for VAT, can they claim VAT back on supplies they have bought ?

A

No

20
Q

Why may a business voluntary deregister for VAT ?

A

It may be running the business down for retirement or part time working meaning it could quite possibly fall below the VAT threshold

21
Q

What form does a business have to fill in to voluntary deregister ?

A

VAT7 form