Tax

Question 1

What are the rates of VAT?

Answer 1

Standard (20%);
Reduced rate (5%)
Zero-rated (0%)
Exempt (N/A)

Question 2

VAT is charged on…

Answer 2

Any supply of goods/services made in the UK on a taxable supply by a taxable person in the course or furtherance of business.

Question 3

VAT: Registration and de-registration threshold

Answer 3

£85,000 registration;
£83,000 de-registration;

Question 4

When must a person register for VAT?

Answer 4

1. At the end of any month if the value of taxable supplies in one year or less exceeds the threshold.
2. Any time it is believed that the value of taxable supplies in a 30 day period will exceed the threshold.

Question 5

Definition of output tax

Answer 5

VAT charged by a business when making a supply of goods/services.

Question 6

Definition of input tax

Answer 6

VAT paid by a person on goods/services.

Question 7

Requirements for VAT invoices

Answer 7

A business must supply another with invoices on VAT paid within 30 days of the supply (and keep a copy).

Question 8

Requirements for VAT returns

Answer 8

1. Businesses must submit a VAT return every 3 months. The deadline is one month and seven days after the 3 month period.
2. Businesses paying +£2.3m on VAT – monthly payments on account and balance paid on quarterly VAT return.

Question 9

Special schemes of VAT

Answer 9

Retail schemes; cash accounting; annual accounting; flat rate scheme.

Question 10

VAT ‘cash accounting’ scheme

Answer 10

Businesses with a turnover of under £1,350,000 (excluding VAT and exempt supplies) may opt for it.

Question 11

Define the VAT ‘annual accounting’ scheme

Answer 11

Businesses with a turnover exceeding £1,350,000 may be permitted to make an annual return.

Question 12

Define the VAT ‘flat rate accounting’ scheme

Answer 12

Businesses with a taxable turnover not exceeding £150,000 and total annual turnover not exceeding £230,000 may elect to pay VAT at a flat rate.

Question 13

Calculation of tax on VAT-inclusive prince

Answer 13

A VAT-inclusive price for goods/services combines the price of the supply and the VAT payable. To calculate the VAT, multiply the figure by 1/6. This VAT fraction provides the equivalent of 30% on the VAT-exclusive price.

Question 14

Definition of a close company

Answer 14

1. Five or fewer participators;
2. If more than 5 participators, all of them are also directors.

Question 15

Participator in a close company (definition)

Answer 15

Any person with a share in capital or income in the close company.

Question 16

Control in a close company (definition)

Answer 16

Control over the company by voting rights or entitlement to (i) share capital allowing 50% or more of income; (ii) Greater part of assets on WU.

Question 17

Loans to participators of close company: effect on the company.

Answer 17

Liable to pay corporation tax at the income rate of a higher tax payer in relation to dividends (33.75%). The deadline is 9 months and one day after the end of the accounting period in which the loan falls.

Question 18

Loans to participators of close company: effect on individual

Answer 18

Where the loan is waived or written off, the individual is liable to pay income tax at the higher tax payer rate for dividends (33.75%) unless the loan has been repaid in full.

Question 19

Loans which are not caught by anti-avoidance rules for close companies

Answer 19

1. Loans in the ordinary course of business.
2. Loans not exceeding £15,000 (along or aggregated).
3. Loans for the goods/services normally supplied by the company in the ordinary course of business where repaid within 6 months or the company’s normal limit.

Question 20

Close-companies and IHT

Answer 20

The value of the transfer is divided and apportioned between shareholder so that IHT cannot be avoided.