VAT Flashcards
Supply of goods
Goods broadly personal property, usually something manufactured or produced
Includes both:
-transfer of legal title to goods (ie all rights of ownership)
-transfer of possession of the goods under under an agreement for sale of the goods or an agreement which envisages that the property will be transferred later (hire purchase)
Transactions specifically treated as supplies of goods
Supply of any form of power, heat, refrigeration
The grant, assignment or surrender of a major interest in land (free hood lease for over 21 years)
Gifts of business assets, EXCEPT:
-Assets < £50 which are gifted for business purposes
- samples
Supplies of services
Deemed supplies of service
Made when a person does something/ agrees to do something for consideration -(unless specifically treated as SOG or neither supply of services)
Specifically defined as supply of services :
-lease/hire of goods
- transfer/sale of undivided share of tittle of goods
Supplies of service for no consideration
Temporary use of business assets for non business use
Where services, which have been supplied to a trader on which input tax has been claimed, are used for private or other non business use
Eg building work to create an office is treated as a business expense, but then the office used as a bedroom instead
Where European court of justice has ruled that restaurants supply services rather than goods. The food on your plate is incidental to the cooking, serving ,washing up and ambience, and it loses any separate identity it might have had
Single (composite) and multiple supplies
Single supplies treated as one supply with a single rate of VAT
Features :
-different components are not available separately
- It would not normally make sense to supply part of the package independently (eg new friegue and it’s delivery from the warehouse)
- some components are clearly incidental or ancillary (provides support to main activities)
- The separation of elements, on an invoice or otherwise, is artificial
Multiple supplies:
Treated as more than one supply with the appropriate VAT rates applied to each element
Features:
- separate pricing
- components are available separately
- clear intention to purchase two different services
VAT groups
Eligibility
Effect
Choice of group companies
Eligibility
Companies under common control (>50%), with a fixed establishment in the UK are eligible to be treated as members of a group
Common control for VAT purposes could be:
- one company controls the others; or
- one person controls all of them; or
- two or more persons carrying on a business in partnership control all of them
Non corporate entity may join if it controls all members group, must have a business establishment in the UK
Effect
VAT group treated as one entity (one vat return)
Representative member is responsible for preparing and submitting the VAT returns on behalf of the group
Choice of group companies
Group registration is optional not all group companies have to join
Sometimes preferable to exclude some members (eg only makes zero rated supplies)
Advantages and disadvantages of group registration
Advantages
+no vat charged in intra group sales
+only one VAT return per group (saves admin costs)
+if a relatively small wholly exempt company is included in the group, it may be possible to recover input tax under de minimis
Disadvantages
-Jointly and severally liable for the VAT of the group as a whole
- Having to make one return may cause administrative difficulties in collecting information (eg info for 100 subs)
- Bringing in an exempt or partially exempt company may lead to a restriction of recovery of input tax for other companies in the group
Partial exemption
Partially exempt trader- makes both taxable and exempt supplies
Always able to recover VAT on taxable supplies, may be able to recover on exempt if one of the partial tests satisfied
Simplified tests:
1)
a) total input VAT less than it equal to £625 pm on average and
B) exempt supplies less than or equal to 50% of total supplies for period
If meet both - VAT recoverable
If failed move to test 2
Test 2
A) total input VAT less input tax directly attributable to taxable supplies less than or equal to £625 pm on average
And
B) exempt supplies less than or equal to 50% of total supplies for period
Need both
Partial exemption test 3
Taxable
Exem
VAT-directly attributable X X
Not directly attributable X
X X ^ -> Supplies of taxable items/ total supplies Round UP to nearest whole % (65.1=66)
_. _
X. X
Taxable total fully recoverable
Exempt total only recoverable if de minimis satisfied
Must meet both :
Annual adjustment
End of year calculation using simplified test or standard calculation is required
Vat year usually ends on 31 March, 30 April or 31 may
Amount recoverable for year > total quarterly amounts recovered = additional VAT may be recovered from HMRC
Amount recoverable for the year < total quarterly amounts recovered = pay HMRC the difference
Reclaim previous expenses
Input can be recovered on services supplied six months previous to registration
Input vat can be reclaimed on goods purchased four years before registration as long as supplied for business purposes and still held
