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Taxation ACCA > Chapter 25 - VAT: Outline > Flashcards

Chapter 25 - VAT: Outline Flashcards

1
Q

Is VAT direct or indirect?

A

Indirect

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2
Q

What is VAT charged on?

A

Most goods and services in the UK

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3
Q

Who is VAT suffered by?

A

The final consumer

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4
Q

Who collects VAT?

A

By the business on behalf of HMRC

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5
Q

What are the three essential needed before VAT can be charged?

A
  • Taxable person
  • Taxable supply
  • Business
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6
Q

What is a person who is or should be registered for VAT, because they make taxable supplies

A

A taxable person

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7
Q

What can a taxable person be?

A

An individual or a legal person such as a company

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8
Q

What is is everything which is not exempt or outside the scope of VAT. It includes sales and purchases of most goods or services.

A

Taxable supply

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9
Q

Is input tax payable or recoverable from HMRC?

A

Recoverable

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10
Q

Is output tax payable or recoverable from HMRC?

A

Payable

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11
Q

What three things can supply be?

A
  • Taxable
  • Exempt
  • Outside the scope of VAT
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12
Q

What kind of supply is taken into account when determining whether a company should register for VAT.

A

Taxable supply

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13
Q

Is input VAT related to exempt supplies recoverable?

A

No

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14
Q

What are the three rates taxable supplies are charged at?

A
  • Zero rate
  • Reduced rate
  • Standard rate
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15
Q

Can you charge VAT on exempt supplies?

A

No

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16
Q

Can you reclaim input VAT on exempt supplies?

A

No

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17
Q

Can you register for VAT on exempt supplies?

A

No

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18
Q

Can you charge VAT on Zero rated supplies?

A

Yes at 0%

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19
Q

Can you reclaim input VAT on zero rated supplies?

A

Yes

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20
Q

Can you register for VAT on zero rated supplies?

A

Yes

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21
Q

Name the six book examples of exempt supplies.

A
  • Land
  • Postal services
  • Financial services
  • Education
  • Insurance
  • Sports (entry fees)
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22
Q

Name the seven book examples of zero rated supplies.

A
  • Children’s clothing
  • Non-luxury food
  • Books
  • Medicines
  • Transport
  • Exports outside the EU
  • Gifts to charities
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23
Q

What are the two tests for compulsory registration?

A
  • Historic turnover test

- Future prospects test

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24
Q

When must you notify HMRC of registration with the Historic turnover test?

A

Within 30 days of the end of the month in which the registration threshold is exceeded.

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25
Q

By when is registration effective for the historic turnover test?

A

Registration is effective from the first day of the second month after the taxable supplies exceed the threshold.

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26
Q

When does a trader need not register after the historic turnover test?

A
  • If supplies are not expected to exceed 83,000

- If their supplies are wholly zero rated.

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27
Q

When do you use the future prospects test?

A

When taxable supplies in the next 30 days in isolation are expected to exceed £85,000

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28
Q

When must HMRC be notified if you pass the future prospects test?

A

Before the end of the 30 days

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29
Q

From when will registration will be effective with the future prospects test?

A

From the beginning of the 30 day period.

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30
Q

Once registered for VAT, Output tax must be charged on…

A

Taxable supplies

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31
Q

What must be quoted on all invoices?

A

The traders VAT registration number

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32
Q

How long is the traders tax period (usually)

A

3 months

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33
Q

What is input tax recoverable on?

A

Business purchases and expenses

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34
Q

What must be maintained once registered for VAT?

A

Appropriate VAT records

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35
Q

What are the three advantages of voluntary registration?

A
  • Avoids penalties for late registration.
  • Can recover input VAT on purchases.
  • Can disguise the small size of the business.
36
Q

What are the two disadvantages of voluntary registration?

A
  • Business will suffer the burden of compliance with all VAT administration rules.
  • Business must charge VAT. This makes their goods comparatively more expensive than an unregistered business, for customers who cannot recover the VAT (i.e. final consumers).
37
Q

When is voluntary registration beneficial?

A

When the business is making

  • zero rated supplies and has input VAT that it can recover, or
  • supplies to VAT registered customers
38
Q

When is voluntary registration not beneficial?

A

When the business is making

-Supplies to non-VAT registered customers

39
Q

Do all members of a group have to join a VAT group?

A

No

40
Q

Is there a need to account for VAT in intra-group supplies?

A

No

41
Q

Are all members of a group liable for VAT?

A

Yes

42
Q

What are the two advantages of group VAT registration?

A
  • VAT on intra-group supplies eliminated

- Only one VAT return required, which should save administration costs

43
Q

What are the two disadvantages of group VAT registration?

A
  • All members remain jointly and severally liable

- A single return may cause administrative difficulties collecting and collating information.

44
Q

What are the conditions for recovery of pre-registration input VAT on goods?

A
  • The goods must be acquired for business purposes and should not be sold or consumed prior to registration (e.g. should still be in inventory).
  • The goods have not been acquired more than four years prior to registration.
45
Q

What are the conditions for recovery of pre-registration input VAT on services?

A
  • The services must be supplied for business purposes.

- The services should not have been supplied more than six months prior to registration.

46
Q

When must someone de-register?

A

When they cease to make taxable supplies.

47
Q

When should HMRC be notified of de-registration?

A

HMRC should be notified within 30 days of ceasing to make taxable supplies.

48
Q

When is VAT regsitration cancelled?

A

VAT registration is cancelled from the date of cessation.

49
Q

When is the final tax liability waived on deregistartion?

A

When it is £1000 or less.`

50
Q

When does compulsory de-registration occur?

A

When a business is sold or otherwise transferred as a going concern to new owners

51
Q

What are the two ways sale of a business may be treated?

A
  • Normal taxable supply

- Transfer of a going concern

52
Q

What is the result of a business being treated as going concern?

A
  • Not treated as taxable supply
  • No output tax charged on assets transferred by seller
  • No input tax recoverable by the purchaser
53
Q

What are the conditions for a business to be treated as a going concern?

A
  • The business is transferred as a going concern.
  • There is no significant break in the trading.
  • The same type of trade is carried on after the transfer. -The new owner is or is liable to be registered for VAT, immediately after the transfer.
54
Q

What is the basic tax point for goods?

A

When they are collected, delivered or made available by the customer.

55
Q

What is the basic tax point for services?

A

-When they are performed

56
Q

What may the basic tax point be overridden by?

A

The actual tax point

57
Q

What is step 2 of calculating the actual tax point?

A

Ask…

On or before BTP has…

  • A tax invoice been received? , or
  • A payment been received?

If yes

=The earlier date
=Compulsory ruling

58
Q

What is step 3 of calculating the actual tax point?

A

Ask…

Has a tax invoice been issued within 14 days of BTP?

If NO
ATP=BTP

If YES
ATP = invoice date

59
Q

What are the three tax point special rules?

A
  • Goods on sale or return
  • Continuous supplies
  • Sales under hire purchase
60
Q

What is the time supply for Goods on sale or return?

A

earlier of:
– the date when the goods are adopted by the customer, or
– 12 months after the despatch of the goods.

61
Q

What is the time supply for Continuous supplies?

A

earlier of:
– a tax invoice being issued, and
–a payment received

62
Q

What is the time supply for Sales under hire purchase?

A

When they are collected, delivered or made available by the customer.

63
Q

What is the basic rule for value of taxable supply?

A

The value of a taxable supply is the amount on which the VAT charge is based. This is normally the price (before VAT) charged by the supplier.

64
Q

When there is a discount offered, what is the VAT calculated on?

A

The price paid by the customer

65
Q

If a supplier does not know whether a prompt payment discount will be taken advantage of, what do they do?

A

Charge VAT on the full amount.

66
Q

If a supplier charged full price and then later the customer takes advantage of a prompt payment discount, what do they do?

A
  • Issue a credit note if the discount is taken, or

- Adjust their records to account for output tax on the amount received.

67
Q

Where the trader initially purchased the goods for private purposes, can you claim input VAT and is there an Output VAT charge?

A

No input VAT can be reclaimed and there is no output VAT charge.

68
Q

Where the trader withdraws goods which were purchased for business purposes, can input VAT be recovered?

A

Yes

69
Q

Where the trader withdraws goods which were purchased for business purposes, how must output VAT be accounted for?

A

Output VAT must be accounted for on the replacement value of the supplies.

70
Q

Gifts of inventory or non-current assets are treated as taxable supplies at replacement cost. What are the two exeptions?

A
  • Goods to the same person which cost the trader £50 (excluding VAT) or less in a 12 month period.
  • Business samples, regardless of the number of same samples given to the recipient.
71
Q

Are gifts of services, whether to employees or customers taxable supplies

A

No

72
Q

What can a taxable person claim VAT back on?

A

Goods and services which are supplied to them for business purposes.

73
Q

What is needed to support a claim for recovery of input VAT?

A

A VAT invoice

74
Q

For VAT purposes is there a distinction between capital and revenue expenditure?

A

No

75
Q

If capital assets are subsequently sold, output VAT must be charged as….

A

A taxable supply

76
Q

What are the two goods and services that input VAT cannot be recovered on?

A
  • Business entertaining (e.g. entertaining suppliers and U.K. customers)
  • Motor cars
77
Q

When can Input VAT be recovered on Business entertaining?

A

-Entertaining overseas customers

78
Q

When can Input VAT be recovered on motor cars?

A
  • used 100% for business purposes (e.g. driving school cars), in which case 100% recovery available, or
  • leased, in which case 50% of input VAT is recoverable where the car has some private use.
79
Q

Is any output tax due on disposal of a motor car?

A

No

80
Q

How do you calculate VAT on goods or services that are partly for personal use?

A

Apportionment

Not for motor expenses

81
Q

Can a business recover input VAT on the running costs of a car even when there is some private use?

A

Yes, all of it

82
Q

Is VAT charged on Insurance or a road fund license?

A

No

83
Q

If a business pays for the fuel cost for an employee can they recover input VAT?

A

Yes

84
Q

If there is some business use of the car and the driver reimburses the business for full cost of fuel for private journeys what happens?

A

Output VAT is payable on the Amount reimbursed

85
Q

If there is some business use of the car and the driver does not reimburse the business for any full cost of private journeys what happens?

A

Output VAT is payable on scale charge

86
Q

What are the conditions to be able to claim VAT relief for impairment loss?

A
  • At least six months must have elapsed from the time that payment was due (or the date of supply if later).
  • The debt must have been written off in the seller’s VAT account.
  • Claims for relief for irrecoverable debts must be made within four years and six months of the payment being due.
87
Q

How is relief for impairment losses obtained?

A

By adding the VAT element of the irrecoverable debt to the input tax claimed.

Taxation ACCA (27 decks)

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