Communicating VAT and Payroll information Flashcards
Who will VAT reports be checked by to ensure accuracy, if working for a business (industry) ? P145
- Senior member of staff, owner, manager
Who will the accountant need approval from relating to VAT submission , if they are working for an accountancy practice ? P145
Client
Where will the accountant advise of the amount due to the HMRC on the VAT return ? P145
- Box 5 - draft VAT return
- date to be paid
What must happen with the wage reports and payroll in relation to reporting information to the relevant person ? P145
- appropriate person e.g. accountants - year end accounts
- approval before payroll submission / payment to employee, HMRC, pension providers , trade unions
What can happen to a business if it does not effectively communicate the time limits relating to submission of info / payments to the HMRC ?
- significant penalties and fines
What are payroll submissions made in ? P146
- RTI submission
Why is the timing of vat payments important for the cash flow of the business ? P147
- Quarterly submission - one month and 7 days
- payment collected - three working days
- prompt payment invoices = working capital
- Look at example
What effect does efficient payment of VAT have on the cash budget business ? P148
- Consider:
- output monthly cash inflow + quarterly payments monthly cash outflow = time between inflow and making payment = increased bank balance
- further improivement = tighter credit control
Aside from the VAT act 1994 , where else do the principles of VAT law originate from - 1st place P150
- Statutory instruments - rules and regulations
- authority of Acts of Parliment
- No passing an Act of Parliament
Aside from the VAT act 1994, where else to the principles of VAT law originate from - 2nd place ? P150
- VAT notices
- www.gov.uk
When are changes in VAT regulations most importantly change ? P150
- Period following budget
- ALSO VAT rates Variation - time to time
How do VAT rate chnnages affect the running of businesses ? P150
- Output tax calculation
- total prices - invoices, credit notes, price lists, price labels
- rate change timing = input claim effect
How do changes in the types of goods and services subject to VAT affect running of the businesses? P150
Extension - reduced rates
What is an exampe of payroll legislation that changes every year ? P151
- National minimum wage
- National living wage
- employers must pay appropriate
What is the most common and far reaching change to the VAT system ? P151
- Change - VAT rate
- zero rate = no change
- reduced rate = rare change
- standard rate = subject to change
What are the main reasons for a governnments to change the VAT rates ? P151
- Consumer spending in economy - e.g. increase = discouragment
- increase tax revenue = funding government spending
Dealing with VAT Standard rate change - what if the change takes effect on 1st April , and the customer pays after 1st April for goods received prior to this date? P152
- Sale before
- Original (lower) rate applies
Dealing with VAT Standard rate change - what if the change takes effect on 1st April , and the business issues a VAT on or after 1st April for goods supplied before the date ? P152
Business can choose - earlier lower rate
Dealing with VAT Standard rate change - what if the change takes effect on 1st April, and the vusiness provides services that started before 1st April but finish after 1st April ? P152
- Work done to 31st March = invoice lower rate
- Work done after 31st March = invoice higher rate
Dealing with VAT Standard rate change - what if the change takes effect on 1st April, and the business provides a continuous service such as leasing office space? P152
- Account VAT due - earlier of issues / receives payment
- higher rate charge - after 1st April
Dealing with VAT Standard rate change - what if the change takes effect on 1st April - how should businesses claim back the VAT charged by their suppliers ? P152
- normal way
- invoice received after rate for purchases before = VAT at original (lower) rate
How would a business using cash accounting scheme be affected by changes ?
- declare to hmrc based on payment received
- identify sales before changes
- charge vat on sales before 1st April - VAT lower rate
How does a business using a flat rate scheme deal with chages tro the scheme ? P153
- Revised percentage
- use - after change in standard rate
How does a business using the annual accounting scheme deal with changes to VAT scheme ? P153
No chnage
payment of instalments
Who needs to know about VAT rate rise ? P153
- HMRC - advance notification
- notify staff
- notify customers
Why is it important to advise a customer in advance of changes in the VAT rate ? P153
- Motivation - buy more, pay less
- avoidance - annoyance and confusion
When VAT rate changes are announced in advance what should the business make plans for ? P153
- informing employees
- adjusting to computerised accounting software
Where are the main areas of the business that will need to know about the changes in VAT rates P153/P154
- Accounting and finance people - day to day transactions
- Accounting and finance people - financial forecasts
- markerting, sales, customer service staff - advice on price lists
- shop, floor, warehouse staff - physically pricing goods - stickers
If there should be a chnage to the reporting error threshold on previous returns, who should know ? P155
- Employee - compilation and authorisation VAT return
Who else needs to be told of any reporting errors in previous VAT returns ? P155
- Appropriate management
- correction in current
- OR
- Significance = separate disclosure
- penalty and surcharges - failure to dsiclose
What are other ways that a accounting scheme may be modified ? P155
- Turnover limits raised
- flat rate percentage adjusted
What must a business do if there are changes to special schemes, or what can they do ? P156
- Review worth staying
- annual turnover limit = business withdrawal
What are the 5 ethical principles within accounting to be concerned with ? P156
- Integrity
- Objectivity
- Professional competence and due care
- Confidentiality
- Professional behaviour
What must all VAT and payroll work be carried out with ? P156
- integretiy and objectivity
- confidentiality of personal data processed
- technical knowledge - highest degree - Professional competence
How can an accountant’s integrity and objectivity be threatened ? P156
- Pressure - allow irrecoverable VAT - business’s VAT Return
- must - straightforward and honest
- e.g.:
- claiming back VAT on purchase of a car
- payment - cash in hand - no cash deductions
Why must an accountant be professionally competent and act with due car ? p157
- aware - relevannt legislation and regulation
- failure = penalities and/or fines
- Maintainenace = CPD
- CPD= Job training , attending courses
How does an accountant uphold professional competence and due care if thye have a query about VAT and Payroll beyond their own expertise ? P158
- Line manager referral - appropraite knowledge and expertise
- not deal with themselves
What is confiendeitality in the scope of professional work ? P158
- Non disclosure = unauthorised people
- Without proper and specific authorisation
- sensitive and confidential info - business and employees
What is professional behaviour in the scope of accounting for VAT ? P158
No disrepute - not acting unprofessionally
comply with VAT and payroll legislation
When may the business need to contact the HMRC ? P159
VAT and Payroll issues
What options does the HMRC give for answering questions regarding VAT and Payroll ? P159
- Website communication
- Telephone
- Post
How would the business retrieve an answer to a query online ? P159
- www.gov.uk - search facility
- queries of business
Can a business email a query to the HMRC?P159
- Yes
- Restrictive - number of security processes clearing
How would the business seek the answer to a query from the telephone ? P159
- telephone
- longer than email - busy times - tax/payroll cycles
What if the business has a problem retreiving an answer from online, telephone, and email ? P159
- Writing a letter
- Uncommon - unless some situations
