Chapter 4 Flashcards
What are the records needed for output tax? (Sales)
Sales day book, sales returns day book & cash book receipts
What records are needed for input tax ? ( purchased and expenses )
Purchases day book, purchases return day book & cash book payments
Where is the central record for any VAT registered business?
VAT control account
What side of the VAT control account is input tax ?
Debit ( left )
What side of the VAT control account is output tax recorded?
Credit ( right )
Would a correction of errors go on the credit or debit side of the VAT control account ?
Either depending on the error
In terms of VAT accounting, what is meant by NET error?
The total difference between the errors in the input VAT and the output VAT
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 ?
Declare it separate to the VAT return ( AKA ‘voluntary disclosure’ )
What is bad debt relief ?
Where HMRC allows a business to claim back any VAT from a credit sale they have no chance of getting paid for
How many years and months does the debt have to be for a business to claim bad debt relief ?
More than 6 months overdue but less than 4 years and 6 months
What is the deadline for filing a standard VAT return ?
One month and seven days after the end of the VAT period
If the accounting records are kept correct should the VAT return agree with the Control account ?
Yes
Why may a VAT return not reconcile with the VAT control account ?
If there has been an error with the data transferred or if the accounting software has not been set up properly
How many late submission points can a business get if they do their vat returns yearly ?
Two points
How many late submission points can a business get if they do their vat returns quaterly ?
4 points
How many late submission points can a business get if they do their vat returns monthly ?
5 points
How long does it take for late submission penalty points to expire ?
24 months from the first day of the month after the late submission occurred
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 ………?
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
For errors on the VAT return the reporting threshold is the greater of …………?
£10,000 or less
Or
1% of the total value of sales and all other outputs excluding VAT
If a business pays HMRC by direct debit how many extra days do they get to pay their VAT return ?
3 days
What happens if a business submits its VAT return late ?
It will have late submission penalties which works on a points based system
What do late payment penalties not apply to ?
Instalments for the VAT annual accounting scheme
When will a business get its first late payment penalty ?
If it’s payment is 16 or more days overdue
What happens if a VAT payment becomes 31 or more days overdue ?
The first payment penalty increases and the business gets a second late payment penalty
Does HMRC charge interest on all late payments where VAT is due ?
Yes
What are the rates of interest charged by HMRC for late payment ?
Whatever the bank of England’s base rate is plus 2.5%
