Chapter 13 - VAT General Principles

Question 1

General Principles

Answer 1

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

Question 2

VAT Rates

Answer 2

Standard rate: 20%
Reduced rate: 5%
Zero rated: 0%
Exempt: not subject to VAT

Question 3

VAT Fraction

Answer 3

Multiply VAT inclusive price by 1/6 to get the VAT amount.

Question 4

Output Tax

Answer 4

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

Question 5

Input Tax

Answer 5

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

Question 6

Taxable Supplies

Answer 6

Those chargeable at standard, reduced or zero rate VAT

Question 7

Exempt Supplies

Answer 7

Certain supplies are exempt from VAT, so no input tax is recoverable as opposed to zero rated supplies

Question 8

Returns and Payment

Answer 8

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