Module 11: Introduction to VAT Flashcards
VAT inclusive price
Gross
VAT exclusive price
Net
How to calculate VAT on net price
Net x 20%
How to calculate VAT on gross price
Gross x 1/6
6 conditions all to be met for input tax to be available for recovery
- Supply of goods and services is being made
- To a taxable person
- For business purposes
- Must have evidence of purchase
- Input tax must have been correctly charged
- Must be used to produce taxable goods/ services
Input tax on cars
Cannot be recovered (unless it is 100% business use) or qualifying purpose eg driving school car/ taxi
Input tax on director’s accommodation expenses paid for by the business
Not recoverable t
Input VAT on costs of servicing, repairs and additional accessories for cars
Recoverable as long as there is some business use
VAT on car lease payments
Reclaimed in full if 100% business use
50% if available for any private use
3 options for a business buying fuel for a car with a mix of private and business use
1) Do not recover any input VAT
2) Keep detailed mileage records to reclaim the precise business % of the input VAT
3) Recover all input tax on all fuel purchase in exchange for paying some output VAT (calculated using fuel scale charges set by HMRC)
De-registration threshold VAT
< £83,000 in the next 12 months
Advantages of voluntary registration
- Immediate entitlement time recovery of input tax
- Avoids the possibility of a late registration penalty
- Gives the impression of size and respectability
Disadvantages of voluntary registration
- Puts prices up by 20%
* Extra admin costs and exposure to penalties
Who is required to register for VAT?
Person NOT business
Input VAT on goods still owned at date of deregistration
Output VAT must be paid over to HMRC on final VAT return.
Unless VAT charge < £1000 (ie goods with a gross value of < £6000) - no charge
Common penalty regime
30%/ 70%/ 100%
Records must be kept for
6 years
VAT returns and payments due
Within 1 month and 7 days of period end
Zero rated VAT
Taxable supplies therefore can still recover input tax but do not charge output tax
Repayment traders (only make zero rated supplies) VAT returns
Monthly to aid cash flow
Late paid VAT leads to
Default surcharge but
No interest
VAT registered historical test
30 days to notify
Registered from end of month following month limit is breached
Future test registered
Notify by end of month following
Registered at start of 30 days
Penalty regime - non deliberate failure to notify chart ability
30%
Penalty regime - deliberate failure
70%
Penalty regime - deliberate failure with concealment
100%
Penalties can be reduced if
Taxpayer discloses failure to HMRC as soon as practical
