Module 3 - VAT Flashcards
On what is VAT charged?
- supply of taxable goods and services made in the UK
- including some goods exported to EU countries
- the import of goods into the country
What are the three rates of VAT?
- 20%
- 0%
- 5%
What rate of VAT is domestic fuel?
5%
What rate of VAT are contraceptive products?
5%
Name some exempt supplies (free of VAT entirely) - not to be confused with 0% VAT
- Banking & Insurance
- Finance
- Health
- Education
What is a regressive tax?
Where those on a lower income pay proportionately more than those on higher incomes
VAT is an example of this
What is OUTPUT VAT?
Where a trader charges VAT on their goods or services
What is INPUT TAX?
The VAT a trader pays on goods and services for use within their business.
Relating to VAT what does a vat registered trader have to pay HMRC?
The difference between the output - input tax
For example if £10k VAT charged to customers and £7k VAT paid on goods and services trader will need to pay HMRC £3K
If a trader has paid out more in VAT than they have claimed can they claim the excess back off HMRC?
Yes
Name the two input VAT that can’t be reclaimed?
Not relating to entertainment expenses
VAT on cars - unless exclusively and wholly for use in the business.
All traders must register for VAT if…
They’ve hit the threshold in the past 12 months or believe they will within the next 30 days
What happens if a business hits the threshold but doesn’t register?
HMRC takes a dim view and may charge penalties
Is it possible for traders to volunteer to be VAT registered? If so why?
Yes
Where a trader has significant input VAT but not output so can potentially they can claim a refund
Buy in - charge out
Hope to remember the difference between input and output in regards to VAT
Buy in - charge out
Input = vat charged on goods and services bought in for the business
Output = vat charged on good and services being sold out of the business
