The VAT return, errors, and penalties Flashcards
1
Q
What will remain the same , despite businesses now using accounting software to submit vat returns ? P75
A
- Periodic collection
- e.g. - normally, quarterly
2
Q
What are the basic records a business must maintain relating specifically to VAT 7 points? P75
A
- Sale invoices
- purchase invoices
- credit/ debit notes
- cash / petty cash
- documents - goods exported
- deposits, advance payment , delayed payment
- VAT control account
3
Q
What records are needed to record output tax ? P76
A
- Sales daybook
- Sales return daybook
- Cashbook - receipt
4
Q
When recording output tax, what is includeed in a sales daybook ? P76
A
- Sales on credit = Sales invoices
- VAT analysis - output calculation
5
Q
What is included in the sales returns day book , when recording output tax ? P76
A
- Credit given
- output tax deduction
- VAT analysis - credit/ debit notes
6
Q
What is included in the cashbook receipt side, when recording for output tax ? P76
A
- receipts - not on credit
- VAT analysis
- receipt from credit customers - NORMALLY not
- receipt from credit customers - cash accounting scheme
7
Q
What records are needed for input tax ? P76
A
Purchase daybook
Purchase return daybook
Cashbook - payment side
8
Q
What is included in the purchase daybook ? p76
A
- Purchases on credit (invoices?)
- VAT analysis - input vat total
9
Q
What is included in a purchases returns daybook ? P76
A
- Credit received
- input tax - deduction
- VAT analysis - credit/ debit notes
10
Q
What is included in the cashbook payment side, when recording for input tax ? P77
A
- Brought - non credit basis
- credit purchases - NORMALLY ignored
- cred9t -urchases - cash accounting system
11
Q
Aside from a cash book payment side, what does a business need to account for input vat tax ? P77
A
- Petty cash book
- VAT column - small expenses
12
Q
What is the central record for any VAT registered business’ bookeeping system ? P77
A
VAT control account
13
Q
What is included on the debit side of a VAT control account ? 9 points P79
A
- Input tax
- purchases daybook
- cash book
- petty cash book
- postponed VAT imports ( same as credit side)
- bad debt relief
- acquisition into northern ireland
- reverse charge
- error correction
14
Q
What is included on the credit side of a VAT control account ? P79
A
- Output tax
- Sales Daybook
- Cash book
- Postponed VAT on imports (same as debit)
- Error correction
- reverse charge
- fuel scale charge
- private usuage
- supplies to employees
15
Q
Where does the VAT calculation go on the control account ? P80
A
- Left side - money to reclaim
- Right side - money to be paid
16
Q
How is the VAT actually paid / reclaimed for the previous VAT period treated in the VAT account ? P80
A
- Not included - VAT account
- Opening balance = money paid/ reclaimed
17
Q
What can a business do if they find an error in a previous VAT period ? P80
A
Adjust - current VAT return
18
Q
What must an error be in a previous VAT period for the business to be able to adjust ? P80
A
- Below reporting threshold
- not deliberate
- accounting period = < 4 years before
19
Q
What is the error reporting threshold the greater of ? P81
A
- £10K or less
- 1 % all net outputs (vat exc) - 50K
20
Q
What can be done if the error threshold is not exceeded ? P81
A
- net errors > error reporting threshold
+ amount due sales + other output (box 1)
+ amount to reclaim + other purchases (box 4)
21
Q
What is a net error ? P81
A
- total error (input tax) - total error (output tax)
*
22
Q
What if the error is the over the reporting threshold ? P81
A
- HMRC ‘voluntary disclosure’
23
Q
What are the main boxes within the VAT account ? P81
A
- VAT - sales and other outputs
- Acquisitions of goods - Northern Ireland from EU member states
- Total VAT due
- VAT - purchases and other inputs
- VAT - pay/ reclaim
- Total value - sales and all outputs (no VAT)
- Total value - purchases all outputs (no VAT)
- Total of supplies -Northern Ireland > EU member states
- Total of acquisitions - EU member states > Northern Ireland
24
Q
What is included in box 1 of a VAT return in more detail ? 7 points P81
A
- Imports - postponed accounting
- fuel scale charges
- reverse charge VAT
- supplies to employees
- private usuage
- credit notes given
- error corrections
25
What is included in box 4 of the vat return in more detail ? P82 - 6 points
* Imports - postponed acconting
* reverse charge
* acquisition of goods in NI (box 2 )
* bad debt relief
* supplier credit notes
* error correction
26
What does box 6 in the VAT reutrn contain ? P82
* Exempt
* Standard
* Zero-rated supplies
* Supplies to EU and non -EU states
* fuel scale charge - net amount
* tota adjusted - credits issued
27
What does box 7 in the VAT return contain ? P82 7 points
* Net value - purchases and expenses
* standard
* zero
* exempt
* imports and acquisition of good into NI
* reverse charge
* total adjusted - credits issued
28
What is bad debt ? P84
* Amount owing - written off
29
What is bad debt relief ? P84
* VAT scheme
* claim back VAT - already paid over to HMRC
* No chance recovery
30
What are the conditions for bad debt relief ? P84
* More then 6 months - less than 4 years and 6 months overdue
* separate bad debt account
* no facotring company
* not charge more - normal selling price
31
Where on the VAT return can a business add the figure reclaiming bad debt, if the criteria for bad debt is satisified ? P84
* ADD - box 4 - VAT return
32
What happens to bad debt under the cash accounting scheme ? P84
* Cannot be reclaied
* VAT not paid - after customer paid business
33
What is making tax digital ? P85
* Initiative - accounts in digital format
* effiecient administration of tax
34
What must a business that is required to comply with MTD have and use ? P85
* Compatible accounting software
* maintaining accounting records
* VAT returns
* API (Application Programming Interface) - VAT return
* gov website - software check
35
What is a business' turnover goes from above the threshold to being back below the threshold, and they are submitting tax digitally ? P85
* keep and submit digitally
* deregistration / exemption criteria = no digital records
* digital preservation - accouunting records
36
What is the deadline for submitting a VAT return ? P85
One month 7 days - end of VAT period
Not annual accounting scheme
Annual accounting - 2 months from end of vat year
37
For example, if a business with a standard quarterly scheme had a quarter ending 30th April, when must they submit the VAT return ? P85
* 7th June
38
What must then happen once the VAT return has been submitted ? P85
* Electronic payment:
* direct debit
* BACS
* if DD = three working days after VAT return submission date
39
What happens if the business fails to pay the HMRC by the deadline , or has insufficient funds once payment is trying to be collected ? P86
Penalised
40
What must happen if box 5 in the VAT return advises of a refund due from the HMRC ? P86
* HMRC schedule repayment
* Within 10 working days
* Up to 21 days - HMRC has query
41
Why may payment by the HMRC not be made back to the business, even if there's an amount owed by the HMRC ? P86
Outstanding amount owed to the HMRC
42
What should happen with VAT accounts if the accounts of the business have been kept correctly ? P86
Balance of VAT return = balance of VAT control account
43
What if the VAT on the control account does not match with the VAT on the return account ? P86
* Investigation
* mis-posting to VAT control account
* error/omissions - VAT reutrn
44
What are the main reasons for differences between the VAT control account and the VAT return account ? P86
* Data transferral - from computerised accounting system
* accounting software incorrect setup - e.g. incorrect vat scheme :
* flat rate scheme on normal scheme = incorrect amount to HMRC
* cash accounting scheme - payment only
* normal schemes - credit items
45
What happens if a business submits a VAT reutrn late ? P91
* Late submission penalites
* Points based system
46
How does the point based system on late submission of VAT returns work ? P91
* Penalty point - each return
* Unitl penalty point threshold - £200
* subsequent late submission - points threshold
* newly registered business - exempt first late reutn
*
47
What is the late submission points threshold for returns submitted quarterly ? P91
4 points
48
What is the late submission points threshold for returns submitted annually ? P91
2 points
49
What happens to the penalty points if the business hasn ot reached the late submission threshold ? P92
* Points expire automatically - two years
* 1st day of month - after month of late submission
50
When will the points expire for the late submission of a return for VAT quarter ending 31st March 2023 ? P92
* 7th May 2023 - date of submission
* So - from 1st June 2023
* Answer - 1st June 2025
51
If a business has reached the late submission penalty threshold , when is the only time the points can be reset to zero ? P92
* Complete a period of compilance
* Submission of all outstanding returns (previous 24 months) - overdue or not
52
What does a period of compilance refer to ? P92
* Submission all returns on time
* 1st day - month following day after missed deadline
53
When would a period of compilance begin from , if there is a missed submission date of 7th August ? P92
1st September
54
If on an annual scheme, when would the period of compilance start for a missed submission date of 30 June ? P92
* 1st August
55
What is the length of the period of compilance for a business that submits VAT returns quarterly ? P92
* 12 Months
* need 4 on time submissions
56
What is the length of the period of compilance for a business that submits VAT returns annually? p92
* 24 months
* need 2 on time submissions
57
What is meant by submission of all outstanding returns ( condition B) of removal ofv penalty points ? P93
* Previous 24 months
* Includes period of compilance
58
What is the deadline of payment for VAT for businessses that do not pay DD to the HMRC ? P94
* One month and 7 days - end of VAT quarter
59
What can the late penalties on payments be applied to ? P94
* VAT return
* amendment to return / correction
* VAT assessment - non submission / another reason
60
When do late payment penalties not apply ? P94
* VAT payments on account
* installments - VAT annual scheme
61
When will a business get it's first late payment fee ? P94
* 16 / more days overdue
* none - first 15 days
* penalty = 2% = outstanding balance on day 15
62
What if a business' first late payment goes 31 or more days overdue ? P94
* Increases
* second late payment penalty
* 2% outstanding on 15 and further 2% on outstanding at 30
* daily rate - 4% per annum - day 31 cuntil paid in full
63
How would the interests on late payments be calculated if the balance is more than 31 days ? P94
Overdue balance * 4% * days spent overdue / 365
64
What does the HMRC charge in addition to late payment penalties ? P96
* Late payment interests
65
What payments would incur further interests charges ? P96
* Amounts overdue on:
* VAT return
* amendments/ corrections of VAT returns
* VAT assessment
* Missed VAT payment - annual accounting
66
What penalties will incurr further interests chargee ? P96
* all penalties
* inc
* late payment penalties - late payment on VAT
* late submission penalties - non submission on time
*
67
How long are interests charges for late payments ( not first late penalty) applied for , and how is this calculated ? P96
* First day = payment overdue
* until full payment
* Bank of England base rate + 2.5 %
68
In what circumstances can the business claim interests, following the mistake of HMRC ? P97
* Pays too much VAT
* reclaims too little VAT
* payment from HMRC delayed
69
How is interests incurred on payments due back from HMRC calculated ? P97
* Bank of england:
* base rate minus 1 %
* minimum rate 0.5%
70
When does the HMRC repayment interests apply ? P97
* whole period : VAT was overpaid / reclaimed - HMRC is authorised
71
When will the HMRC not pay any interests on amount? P97
Business mistake
72
What will a business be issued with in addition to penalties and interests for late payment ? P97
VAT notcie of assessment of tax - HMRC thinks owe
73
What if a business has been provided with an assessment and it's actually too low ? P97
* 30 days to notifty
* or additional 30 % of assessment amount
74
What if a business submits a paper VAT return , when it should be submitting returns digitally ? P97
£400 penalty
75
What if a business fails altogether to pay VAT due or penalties imposed? P97
Criminal offence
