Chapter 8 - VAT and Corporation Tax Flashcards
What are the main rates of VAT in the UK?
- 0%
- 20%
- Some supplies are ‘exempt supplies’
Explain how the the VAT system works?
A VAT registered trader must charge customers output VAT on taxable supplies. Any input VAT (VAT paid on goods/services purchased) can be offset against output VAT (VAT charged on goods/services sold) any excess of output VAT is paid to HMRC. Any excess of input VAT is reclaimed.
What is the set limit that a trader must register for VAT?
A trader must register for VAT if they make taxable supplies over the previous 12 months of £85,000. Must notify HMRC within 30 days of the end of the month in which the limit was exceeded. Penalties apply if not done.
Name 4 exempt VAT supplies.
Insurance, finance, health, educations, burial and crematory services amongst others
Name 4 zero rated VAT supplies.
(Most) Food and drink, catering and restaurants not exempt, also if food kept warm in shops not exempt books (printed), public transport, drugs & medicine, clothing for children
Over what level of turnover can firms elect to pay VAT on a flat rate scheme?
£150,000
What is the turnover limit for paying VAT on the flat rate scheme?
£230,000
How often should VAT returns be completed?
Every 3 months
What is the current rate of corporation tax?
19%
What was the rate of corporation tax in 2016/17
20%
Over what period is corporation tax paid?
This is charged on a strict accounting period basis rather than a tax year basis. These can not be more than 12 months.
Who pays corporation tax and on what?
Companies pay corporation tax on all their income and gains