Chapter 1

Question 1

Define VAT

Answer 1

A tax on the sale of goods and services

Question 2

Is VAT a direct or indirect tax ?

Answer 2

Indirect

Question 3

What government body collects and regulates VAT?

Answer 3

HMRC

Question 4

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

Answer 4

£85,000

Question 5

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

Answer 5

Output

Question 6

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

Answer 6

Input tax

Question 7

What is the historic turnover test ?

Answer 7

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

Question 8

What is the future turnover test ?

Answer 8

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

Question 9

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

Answer 9

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

Question 10

Who can register for VAT?

Answer 10

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

Question 11

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

Answer 11

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

Question 12

Why may a business voluntarily register for VAT ?

Answer 12

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

Question 13

What type of businesses can’t register for VAT ?

Answer 13

Businesses that only sell VAT exempt goods

Question 14

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

Answer 14

6 years

Question 15

VAT is a tax on consumer ____________ ?

Answer 15

Expenditure

Question 16

When must a business become VAT registered by law ?

Answer 16

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

Question 17

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

Answer 17

Final consumer

Question 18

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

Answer 18

It may face a civil penalty for failure to notify.

Question 19

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

Answer 19

No

Question 20

Why may a business voluntary deregister for VAT ?

Answer 20

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

Question 21

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

Answer 21

VAT7 form