Chapter 1 - VAT General Principles Flashcards
General Principles
Tax on the consumer expenditure and is collected on business transactions and imports/acquisitions. Each stage in the supply of good or services charges VAT (output VAT). Those registered for VAT can claim input tax back. Businesses are not affected and VAT is usually suffered by the final consumer
VAT Rates
Standard rate: 20%
Reduced rate: 5%
Zero rated: 0%
Exempt: not subject to VAT
VAT Fraction
Multiply VAT inclusive price by 1/6 to get the VAT amount.
Scope of VAT
A transaction falls in the scope of VAT if all of the conditions are met:
- it is a supply of goods or services
- it takes place in the UK
- it is made by a taxable person, in the course or furtherance of any business they are carrying on
- it is a taxable supply
If the transaction doesn’t meet all of them, it is outside the scope
Place of Supply
To be within scope, a supply must be made in the UK. Non-UK supplies are outside scope, may be liable to VAT in another country
Output Tax
Output tax is the VAT due on taxable supplies and is the liability of the person making the supply ie the seller must pay the VAT to HMRC
Input Tax
A taxable person can reclaim input VAT on goods and services provided to them, providing they relate to taxable business supplies made in the course of business
Exempt Supplies
Certain supplies are exempt from VAT, so no input tax is recoverable as opposed to zero rated supplies
Returns and Payment
Every taxable person must submit a VAT 100 return declaring the output and input tax for each VAT period - normally three months but one month is also allowed.
Return must be submitted to HMRC along with VAT due no later than one month and 7 days after the end of the period.
All businesses must file online and pay electronically
Stagger Groups Quarter Days
Group 1: 30 June, 30 Sept, 31 Dec, 31 March
Group 2: 31 July, 31 Oct, 31 Jan, 30 April
Group 3: 31 Aug, 30 Nov, End of Feb, 31 May
For each, the VAT year end will be 31 March, 30 April or 31 May
