Chapter 1 Flashcards
Define VAT
A tax on the sale of goods and services
Is VAT a direct or indirect tax ?
Indirect
What government body collects and regulates VAT?
HMRC
What is the current VAT threshold for businesses in the UK?
£85,000
Is VAT charged on services / goods supplied Output or Input tax?
Output
Is VAT charged on services / goods received Output or Input tax?
Input tax
What is the historic turnover test ?
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
What is the future turnover test ?
When annual turnover is expected to exceed the VAT threshold the business must register in the next 30 days
What are the VAT rules in relation to buying a business?
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
Who can register for VAT?
Only a business can register for VAT and become a taxable person
What are the benefits of not being a VAT registered business ?
You will have more competitive prices as you won’t have to Integrate vat into the total price
Why may a business voluntarily register for VAT ?
If they can claim on the input VAT but don’t have to pay any output VAT ( selling zero rated items )
What type of businesses can’t register for VAT ?
Businesses that only sell VAT exempt goods
How long does HMRC require businesses to keep their financial records for?
6 years
VAT is a tax on consumer ____________ ?
Expenditure
When must a business become VAT registered by law ?
When they pass the registration threshold (currently £85,000)
VAT is a tax that is ultimately paid by the _____________ ?
Final consumer
What might happen to a business that doesn’t register for VAT when it should have ?
It may face a civil penalty for failure to notify.
If a business is not registered for VAT, can they claim VAT back on supplies they have bought ?
No
Why may a business voluntary deregister for VAT ?
It may be running the business down for retirement or part time working meaning it could quite possibly fall below the VAT threshold
What form does a business have to fill in to voluntary deregister ?
VAT7 form
