Introduction to VAT

Question 1

What is VAT charged on?

Answer 1

Any supply of goods or services made in the UK, where it is a taxable supply, made by a taxable person, in the course or furtherance of any business carried on by that person.

Question 2

Define `Supply of Goods or Services’

Answer 2

Any supply made in the UK of goods or services done in return for consideration.

Question 3

Define `made in the UK’

Answer 3

The place of supply of the relevant goods or services must be in the UK.

Question 4

Define `taxable supply’

Answer 4

Any supply made in the UK which is not an exempt supply.

Question 5

Define `taxable person’

Answer 5

A person who is, or is required to be, registered for VAT purposes. `Person’ includes individuals, partners, companies and unincorporated organisations.

Question 6

Define `in the course or furtherance of any business carried on by him’

Answer 6

`Business’ is a very wide term and basically any economic activity carried on, on a regular basis. An employee’s services to an employer are excluded. All of a person’s business activities are included in one VAT registration.

Question 7

When is a person required to be VAT registered?

Answer 7

1. At the end of any month if the value of their taxable supplies in the period of one year or less has exceeded the VAT registration threshold (the person must notify HMRC within 30 days of the end of that month and will be registered from the beginning of the second month after the taxable supplies went over the threshold); or
2. At any time if there are reasonable grounds for believing that the value of their taxable supplies in a period of 30 days will exceed the VAT registration threshold (the person must notify HMRC within the 30 days and will be registered from the beginning of the 30 days).

Question 8

What is the current VAT threshold?

Answer 8

The current registration threshold is £90,000.

Question 9

Can a person register voluntarily?

Answer 9

Yes,

Voluntary registration means that input VAT can be recovered.

However, it means that the business will have to charge output VAT on supplies of goods and services to its customers.

Question 10

Can a person de-register?

Answer 10

A VAT registered person may apply to have the registration cancelled where the value of their future annual taxable supplies will not exceed the VAT deregistration threshold.

Question 11

What is the current deregistration thresehold?

Answer 11

The current deregistration threshold is £88,000.