Indirect Tax

Question 1

What are the 3 classifications of taxable supplies?

Answer 1

Taxable - law states VAT must be charged on these items

Exempt - law states no VAT must be charged on these items

Outside the scope of VAT - ignored for the purpose of VAT

Question 2

What are the three rates of VAT on taxable supplies?

Answer 2

Zero rated - classed as taxable with value of nil

Reduced rate - domestic and charitable supplies

Standard rate - any taxable supply that isn’t zero or reduced rate

Question 3

If supplies are exempt what does this mean in terms of VAT?

Answer 3

Cannot register for VAT, cannot charge VAT on sales, cannot recover VAT on purchases

Question 4

If supplies are taxable at zero rate, what does this mean in terms of VAT?

Answer 4

Can register for VAT, charge VAT on sales at 0%, can recover VAT on purchases

Question 5

What are the two types of VAT and where are they generated from?

Answer 5

Input VAT - VAT on sales

Output VAT - VAT on purchases

Question 6

What is the threshold for VAT registration?

Answer 6

£82000

Question 7

What is the threshold for VAT deregistration?

Answer 7

£80000

Question 8

What criteria is required for exemption from VAT registration if taxable turnover is above threshold for registration?

Answer 8

Making only zero rated supplies.

Question 9

When VAT has a fraction is it rounded up or down?

Answer 9

Down

Question 10

What is the difference between a pro-forms invoice and a vat invoice and how does this affect VAT?

Answer 10

A pro-forma is an offer to supply goods instead of proof of sale and is net of vat and therefore not recognised for VAT purposes until payment received and tax invoice supplied

Question 11

What are the 4 schemes for VAT Accounting available?

Answer 11

1. Standard Scheme
2. Cash accounting
3. Annual accounting
4. Flat rate scheme

Question 12

What are the conditions for joining annual accounting scheme?

Note: can be used along with any other scheme except standard scheme

Answer 12

Next 12 months estimated revenue below 1,350,000

Upto date with vat returns

Leave if next 12 months estimated revenue will be above 1,600,000

Question 13

What are the conditions for joining standard scheme?

Answer 13

Supplies are not exempt supplies

Question 14

What are the conditions for joining cash accounting scheme?

Answer 14

Next 12 months estimated revenue below 1,350,000

Upto date with vat returns

Leave if next 12 months estimated revenue will be above 1,600,000

Must settle vat before leaving scheme

Question 15

What are the conditions for joining flat rate scheme?

Note: Can be used with annual accounting but not cash accounting

Answer 15

Next 12 months estimated revenue including all vat and supplies below 150k

Leave if next 12 months estimated revenue including all vat and supplies below 230k

Question 16

What is the penalty for failure to register?

Answer 16

Standard penalty
+
All vat due from date registration should have taken place

Question 17

What is the penalty for incorrect return?

Answer 17

Standard penalty
+
Error must be corrected

Question 18

What is the penalty for late returns or late payment?

Answer 18

Default surcharge: stays on account for 12 months from notice given date

Question 19

What is placed in each box on vat return?

Answer 19

1. Vat on sales + EU non registered customers
2. VAT on Purchases to EU
3. Total vat output (1+2)
4. Vat on purchases UK, EU and non EU
5. Net vat due (3-4)
6. Total sales exc vat
7. Total purchases exc vat
8. Sales within EU to VAT registered companies
9. Purchases within other members of EU