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
Is it possible to deregister for VAT
Yes - believe £83K
Can manufacturers / providers of goods/services that are exempt supplies reclaim input VAT?
Generally speaking, no
Where a business makes ‘zero-rated’ supplies can they reclaim input VAT?
Yes
Give some eclairs of zero rated supplies
- most food
- books (not ebooks)
- drugs / medicine
- aids for disabled
- kids clothes & shoes
- water & sewage services
- air fares
A small business can reclaim all their input vat inc their exempt supplies providing the input VAT attributable to the exempt supplies doesn’t exceed how much?
£7.5K
What is the Flat Rate Scheme - relating to VAT?
Allows small businesses to account for VAT as a percentage of their turnover rather than the difference between the input and output VAT
Rate is based of similar businesses in the same sector
How does a business qualify for the flat rate scheme?
- VAT Taxable turnover of no more than £150k excluding VAT in the next 12 months
Once in the flat rate scheme how much max vat taxable turnover can a business make before becoming ineligible for the flat rate scheme?
£230k inc VAT
Once a business has left the flat rate scheme how long before they can rejoin?
12 months
What is the vat scheme for those dealing in second hand goods?
Dealers only account for vat on the price paid four an item and the price it sold for.
How often does vat need to be submitted?
Generally every three months but larger companies and those who regularly reclaim vat from HMRC may be asked to do so every month
