Inputs and outputs and special schemes Flashcards
What must a business consider when claiming input tax ? p49
- Timing of claim
- buyer - prompt reclaim
- assists cashflow
How can variations in the timing of claims occur ? P49
- Tax point variations
- VAT Special scheme
What ia a partially exempt supplier ? P50
- VAT registered business
- supplies - VAT exempt
- supplies - taxable (.e.g standard rate)
- not reclaim input - exempt supplies purchases
What must a partially exempt business do ? P51
- Workout - input tax recoverable
- unless ‘de minimis’ rule
How odes a partially exempt business workout the amount of VAT owed / reclaim ? P51
- Output tax - charge to taxable / not exempt
- input tax:
1. purchases-> exempt supples -> cannot reclaim input tax
2. purchases -> taxable supplies -> can be reclaimed
What is residual input tax ? P51
- Tax - purchases and expenses
- indirect attribution - taxable and exempt
- input recovery proportioned - taxable supplies
How do you work out the percentage of residual input tax ? P52
- supplies in question (taxable/exempt) / total supplies * 100 = % supplies in question
- 100 - % supplies in question = % residual input tax
What is the ‘de minimis’ limit ? P52
- All input recoverable - taxable and exempt purchases & expenses
- total value input tax > set amount ( de minimum limit)
What is the ‘de minimis’ test ? P52
- Input tax for exempt
- £625 limit
- AND
- > 50 % total input vat for period
How do you calculate on whether the input tax for exempt goods is less than £625 per month ? P52
Input tax for exempt supplies / 12
How do you calculate whether input tax exempt supplies is less than 50 % of total input VAT for the period ? P52
- Input tax ( taxable supplies) + input tax (exempt supplies) = total input tax
- input tax (exempt supplies) / total input tax* 100 = %
- IF % > 50% = de minimum pass
- exempt supplies input tax = recovered in full
What is the ONLY thing busiensses can claim back ? P53
- Actual business expenses
If a business uses goods/ services partly for business purposes and partly for non-business purposes what must it do ? P53
Identify - businesss
identify - non business
What are blocked expenses ? P53
- Cannot reclaim - input VAT
What does the HMRC state about VAT on business entertainment ? P53
- Input tax irrecoverable
- exception - entertaining overseas customers
What is employee entertainment - business expense ? P53
- Reward employee -good work
- business purpose - not blocked
How does a busines deal with mixed entertaining ( business and employee) P53
- Proportion of input - not relate to client/ staff entertaining only
Are businesses generally allowed to reclaim vat if they buy a car ? P54
- No - Input tax blocked
When can input tax be reclaimed on the purchase of a car ? P54
- Wholly business - not even work
- Taxi business, driving instructor
- car dealer - inventory (12 months)
Can a business reclaim VAT on vehicle repares and maintenance ? P54
- Yes
- business pays for work
- some business use of vehicle
What type of vehicles can businesses reclaim input tax on the normal way ? P54
- Commercial vehicles
- Van
- Lorries
- Tractors
How is VAT dealt with by a business leasing / hiring a car ? P54
- 50 % of VAT - leasing payment
- look at example
How does a business deal with selling a vehicle that they previously brought without reclaiming input tax ? P54
- Cannot reclaim input VAT - car brought
- cannot charge vat - car sold
- e.g. driving school charge vat
What are the different ways a business can approach the fuel costs incurred on a company car driven by an employee ? P55
- All fuel business purposes - all input vat reclaimed
- no need to reclaim - low mileage / some private use - all vehicles
- business purposes and private - only business - detailed record
- separate fuel charge