Tax Processes - Chapter 6 - Communicating VAT and payroll

Question 1

What must happen before VAT returns are submitted?

Answer 1

Must be reviewed and approved by either a line manager or the client

Question 2

How can the timing of VAT payments be important?

Answer 2

They can use the output VAT as working capital until it has to be paid to HMRC when the VAT return is due

Question 3

How can having a good payment collection period benefit cash flow?

Answer 3

Keeps money in the bank of the company for longer

Question 4

What are some VAT laws?

Answer 4

• VAT act 1994
• UK statutory instruments
• VAT notices

Question 5

What can change with new VAT regulations?

Answer 5

• VAT rate
• Goods and services chargeable to VAT
• New VAT special schemes

Question 6

What can a VAT rate change impact?

Answer 6

Calculation of output VAT can also impact depending on timing the claims on input VAT

Question 7

What is an example of payroll legislation that changes every year?

Answer 7

National minimum wage and national living wage

Question 8

Why might the government change VAT rates?

Answer 8

• Increase or decrease consumer spending
• Increase tax revenue for the government

Question 9

How would an increase in VAT rate impact retailers?

Answer 9

Charge VAT based on when the sale was made

Question 10

How would increased VAT impact businesses that sell on credit?

Answer 10

Use increased rate on invoices issued after the change date but if works completed before VAT can be accounted for the lower rate

Question 11

How does increased VAT rate impact services provided?

Answer 11

If there is a cross over for services from old to new rate the work completed during lower rate can be charged at that

Question 12

How does increased VAT impact continuous supplies of services?

Answer 12

For something like a lease of office equipment, they should account for VAT whenever it issues an invoice or receives payment whatever is earlier

Question 13

How does increased VAT rate impact reclaiming input VAT?

Answer 13

Should be reclaimed in the normal way depending on when the sale relates

Question 14

How could a VAT rate change impact people on the Cash Accounting Scheme?

Answer 14

Need to identify sales made before the date the change was made and charge at the lower amount

Question 15

How could a VAT rate change impact people using the Flat Rate Scheme?

Answer 15

Will need to use the revised percentage announced by HMRC after the change

Question 16

How would a VAT rate change impact people using the Annual Accounting Scheme?

Answer 16

No change

Question 17

How might advising customers of a VAT rate increase be beneficial?

Answer 17

• More motivated to buy before stuff gets more expensive
• Stop confusion and annoyance of a price rise

Question 18

Why should a business be told well in advance of a VAT rate change?

Answer 18

• So employees can know the change
• Necessary adjustments are made to computerised accounting software

Question 19

Which areas of the business should know about a VAT rate change?

Answer 19

• Finance staff dealing with invoicing and purchases
• Accounting staff who deal with financial forecasts
• People who create and advise price lists both online and printed
• Shop floor and warehouse staff dealing with pricing goods

Question 20

How can you contact HMRC about VAT and payroll issues?

Answer 20

• Website
• Email
• Telephone
• Post