Chapter 4

Question 1

What are the records needed for output tax? (Sales)

Answer 1

Sales day book, sales returns day book & cash book receipts

Question 2

What records are needed for input tax ? ( purchased and expenses )

Answer 2

Purchases day book, purchases return day book & cash book payments

Question 3

Where is the central record for any VAT registered business?

Answer 3

VAT control account

Question 4

What side of the VAT control account is input tax ?

Answer 4

Debit ( left )

Question 5

What side of the VAT control account is output tax recorded?

Answer 5

Credit ( right )

Question 6

Would a correction of errors go on the credit or debit side of the VAT control account ?

Answer 6

Either depending on the error

Question 7

In terms of VAT accounting, what is meant by NET error?

Answer 7

The total difference between the errors in the input VAT and the output VAT

Question 8

If the error is above the threshold or a business has made a deliberate error on the VAT return what would they need to do ?

Answer 8

Declare it separate to the VAT return ( AKA ‘voluntary disclosure’ )

Question 9

What is bad debt relief ?

Answer 9

Where HMRC allows a business to claim back any VAT from a credit sale they have no chance of getting paid for

Question 10

How many years and months does the debt have to be for a business to claim bad debt relief ?

Answer 10

More than 6 months overdue but less than 4 years and 6 months

Question 11

What is the deadline for filing a standard VAT return ?

Answer 11

One month and seven days after the end of the VAT period

Question 12

If the accounting records are kept correct should the VAT return agree with the Control account ?

Answer 12

Yes

Question 13

Why may a VAT return not reconcile with the VAT control account ?

Answer 13

If there has been an error with the data transferred or if the accounting software has not been set up properly

Question 14

How many late submission points can a business get if they do their vat returns yearly ?

Answer 14

Two points

Question 15

How many late submission points can a business get if they do their vat returns quaterly ?

Answer 15

4 points

Question 16

How many late submission points can a business get if they do their vat returns monthly ?

Answer 16

5 points

Question 17

How long does it take for late submission penalty points to expire ?

Answer 17

24 months from the first day of the month after the late submission occurred

Question 18

If a business makes an error on a previous VAT return it will be able to adjust it in its it’s current VAT return if ………?

Answer 18

The amount is below the reporting threshold

The error wasn’t deliberate

It is related to an accounting period that ended less than 4 years ago

Question 19

For errors on the VAT return the reporting threshold is the greater of …………?

Answer 19

£10,000 or less

Or

1% of the total value of sales and all other outputs excluding VAT

Question 20

If a business pays HMRC by direct debit how many extra days do they get to pay their VAT return ?

Answer 20

3 days

Question 21

What happens if a business submits its VAT return late ?

Answer 21

It will have late submission penalties which works on a points based system

Question 22

What do late payment penalties not apply to ?

Answer 22

Instalments for the VAT annual accounting scheme

Question 23

When will a business get its first late payment penalty ?

Answer 23

If it’s payment is 16 or more days overdue

Question 24

What happens if a VAT payment becomes 31 or more days overdue ?

Answer 24

The first payment penalty increases and the business gets a second late payment penalty

Question 25

Does HMRC charge interest on all late payments where VAT is due ?

Answer 25

Yes

Question 26

What are the rates of interest charged by HMRC for late payment ?

Answer 26

Whatever the bank of England’s base rate is plus 2.5%