Indirect taxes Flashcards
What is VAT charged on?
Sale of taxable supplies by a taxable person.
Who is a taxable person?
A sole trader, partnership, limited company, club or association making taxable supplies.
What is a taxable supply?
A taxable supply is one on which output VAT is chargeable and input VAT can be recovered and will be zero-rated, reduced-rated or standard-rated.
How does a business reclaim VAT for an employee/owners business and private use vehicle.
Recover all VAT then charge a rate of output VAT depending on the CO2 rating of the car.
What is a multiple supply?
Where the individual elements within the supply that are treated separately for VAT.
What is a single supply?
Where there is just one supply although it might be made up of lots of things.
What is a partially exempt trader?
Anyone who makes taxable supplies and exempt supplies.
What does a VAT return look like?
£
Output VAT X
Input VAT (X)
-
Net payment/
repayment X/(X)What are 4 exempt property transactions?
- Sale of bare land.
- Lease of a building.
- Sale of old (>3yrs) commercial buildings.
- Sale of existing residential buildings.
What is a zero-rated property transaction?
-Construction and sale of new residential buildings.
What are 3 standard-rated property transactions?
- Construction of commercial building.
- Sale of new (<3yrs) commercial buildings.
- Work on existing residential or commercial buildings.
What is a partially exempt trader?
If a trader makes both taxable and exempt supplies not all input VAT can be reclaimed.
What is the “simplified test”?
If a trader passes test 1 OR 2 they can treat themselves as “de minimis” and recover all input VAT.
Where can you find test 1 and 2?
HTT.
page 58/59 summary on bathroom!!
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What companies are eligible to be treated as members of a VAT group? (2)
- If one of them controls >50% of the others, or
- One person controls >50% of all them.
Can a non-corporate entity such as a sole trader or partnership be included within a VAT group?
Yes, if it’s comprising of UK companies that it controls.
What are 4 consequences of VAT group registration?
- One company is appointed as the representative member.
- The representative member submits one VAT return for the group and makes payment.
- No VAT on intra-VAT group supplies.
- All VAT group members are jointly and severally liable for the group VAT.
What is the “Option to tax”?
The owner of commercial land and buildings can opt to waive the exemption from VAT.
What are the two implications of opting to tax?
- Standard rate VAT must be charged on any subsequent:
- Lease of the building.
- Sale of the building within 20 years of the OTT. - Input tax relating to the supply can be recovered.
The election is made(option to tax)… (on what, by who and for how long)
- On individual buildings.
- By an individual party and is non-transferable.
- Is irrevocable for 20 years, after a 6 month cooling off period.
What is the capital goods scheme?
Allows businesses to recover input VAT on certain assets (HTT).
What happens if taxable supply % changes after acquisition (Capital Goods Scheme)? What is the formula?
- An adjustment is required each year until the end of the adjustment period found in HTT.
- Total Input/10 or 5 year x (TS% now - TS% on initial recovery)
When an asset is disposed of under the capital goods scheme during the adjustment period what are the 2 steps?
- The annual adjustment for use is made as normal in the year of disposal.
- One further adjustment is made using-100% if the disposal was taxable and 0% if the disposal was exempt. (divided by years remaining in the scheme)
What are 3 consequences of the “Flat Rate Scheme”?
- Output VAT due to HMRC is calculated by applying a fixed rate percentage.
- No input VAT is seperately recovered so no input VAT records need to be kept.
- The flat rate percentage depends on category of business (HTT)
What are the t&cs of the flat rate scheme?
See HTT.
How does VAT affect exports outside of the EU?
- Supply is zero-rated provided the seller holds evidence on how and where the export was made.
- Customer accounts for output and input sales tax in own country.
How does VAT affect imports from outside of the EU?
- Importers account for VAT as they bring goods into their own country.
- If importer is VAT registered can recover this input VAT on the next VAT return subject to normal recovery rules.
What is stamp duty? For shares.
0.5% x consideration when buying shares. Nearest £5 and no charge if consideration is under £1,000.
What is stamp duty reserve tax?
For paperless transfer of shares/securities. 0.5% x consideration. No rounding.
What is the stamp duty land tax?
Chargeable on land transactions. Payable by purchaser. Applicable Rate x Consideration. Calculated on VAT inclusive price. Different rate on non-residential property.
How does SDLT work with a lease?
Payable on total premium and NPV of rent payable over the term. Do both separately.
How long prior to registration can you recover VAT? And what on? What are the conditions?
6 months for services, 4 years for goods that were supplied for business use and are still on hand at registration.
Can you reclaim VAT on the entertaining of suppliers?
No.
If you enter a lease for 10 years with annual rent of £20k and a lease premium of £29k, what amount do you charge SDLT on?
£200kbands + 29k0% (as it’s within 0% threshold)
If a trader fails both test 1 and 2 what do they need to do?
Pay all the exempt input VAT recovered back to HMRC.
What SDLT rates do you use for lease premium?
0, 2, 5.
What SDLT rates do you use for the NPV of the lease?
0, 1, 2.
When the partial exemption fraction is 90%, how much input tax can be claimed?
90%
When calculating SDLT do you include or exclude VAT?
INCLUDE
Do you add the additional home SDLT rates onto the base rates or just use them?
Just use them.
When is stamp tax due on an electronic share purchase?
Payable on the 7th day of the month following the month of agreement for a paperless transaction. However, if the transfer can be made by CREST it should be paid over by 14calendar days after the trade date.
What is the maximum house price that qualifies for first time buyer relief?
£500,000
Do you need to round the % when calculating taxable/exempt overheads for VAT?
???
