VAT Flashcards
Scope of VAT
Chargeable on
The sale of taxable supplies
By a taxable person
VAT: Taxable supply
Any supply
Of goods or services
Made in UK
Other than
Exempt supply
Or a supply outside VAT scope
VAT: Taxable person
A sole trader
Partnership
Limited company
Club
Or association
Making taxable supplies
VAT: Reduced rate
5%
Amount trader receives on selling a product when an error means output VAT not being charged on a taxable supply
Considered to be inclusive of VAT
No. VAT registrations for a sole trader carrying on several business
One
No. VAT registrations for multiple limited companies
Multiple
2 years for compulsory VAT registration
Historic
Future prospects
What are both compulsory VAT registration tests based on?
Turnover
Compared to annual registration limit
(Historic Test also considers deregistration limit)
VAT annual registration limit
85k
VAT deregistration limit
83k
VAT: Historic test: Frequency
End of each month
VAT: Historic test: what is the test?
Looks back 12m
To see if total taxable supplies exceeded registration limit
VAT: Historic test: notification
Within 30d
Of end of month exceeded
VAT: Historic test: effective from
First day after end of month following relevant month
VAT: Historic test: Does trader need to register if taxable supplies for next 12m expected to be less than deregistration limit?
No
VAT: Historic test: Does trader need to register if only makes zero-rates supplies
No
VAT: Future prospects test: Frequency
Considered constantly
VAT: Future prospects test: What is the test
Looks forward
Sees if in the next 30d alone
Taxable supplies will exceed registration limit
VAT: Future prospects test: Notification
By end of 30d period
Starting on date reader became aware
VAT: Future prospects test: Effective from
Immediately
(I.e. start of 30d period)
VAT: Future prospects test: Does trader need to register if only making zero rated supplies?
No
VAT: Taxable supplies
All sales
Excluding:
VAT
Exempt supplies
Outside scope supplies
Sale of capital assets
Responsibilities of VAT registered person
- Charge output tax
- Quote VAT no. on all sales invoices
- File return for allocated ‘tax period’
- Maintain appropriate records
What to do if trader registers late for VAT?
So doesn’t charge output VAT on taxable supplies
Pay outstanding VAT to HMRC
(Sales treated as VAT inclusive)
When can someone register for VAT voluntarily
Business making
Or intending to make
Taxable supplies
Voluntary VAT registration: Advantages
Avoids penalties for late registration
Can recover input tax
(On purchases)
Can disguise small size of business
Voluntary VAT registration: Disadvantages
Burden if compliance
Must charge output VAT
(Makes produce more expensive to consumers who can’t claim back e.g. consumers)
VAT deregistration: Compulsory: when?
Business ceases to make taxable supplies
VAT deregistration: Compulsory: Notify HMRC by when
Within 30d
(From becoming aware)
VAT deregistration: Compulsory: Effective from
Date taxable supplies cease
VAT deregistration: Voluntary: When?
Evidence taxable supplies will not exceed deregistration limit in next 12m
VAT deregistration: Voluntary: 12m measured from when
Starting any time
VAT deregistration: Voluntary: Effective from
Date of request
Or agreed later date
VAT: Effect of deregistration
Output tax accounted for
On the value of fixed assets
And inventory
Held at the date of deregistration
On which a deduction for input tax had been claimed
VAT deregistration exception
Final tax liability waived
If less than or equal to
1k
VAT normally accounted for how frequently?
Quarterly
VAT tax point
Date of a supply
To indenting quarter in which it falls
VAT: BPT
Basic tax point
BTP: Goods
Date removed from stock
Or despatched
BTP: Services
Date performed
BTP: Goods on sale or return
Earlier of
Date goods adopted by customer
Or 12m after despatch date
VAT: ATP
Actual tax point
ATP process: Step 1
Identify BTP
ATP process: Step 2 after identifying BTP
On or before BTP, has:
A tax invoice been issued?
A payment been received?
ATP process: Step 2 (invoice or payment made): Yes:
ATP is the earlier date
ATP process: Step 2: No
Step 3:
Has the tax invoice been issued
Within 14d
Of the BTP?
ATP process: Step 3
(Has tax invoice been issued within 14 days of BTP?)
Yes
ATP = Invoice date
ATP process: Step 3
(Has tax invoice been issued within 14 days of BTP?)
No
ATP = BTP
VAT tax points: Deposits
Creates its own tax point
Will be separate tax points for
The deposit
The balancing payment
VAT: Trader withdraws goods for own use
Output VAT accounted for
On full replacement cost of supplies
VAT: Gifts of stock or fixed assets
Treated as taxable supplies
At replacement value
Unless:
Cost of total gifts
Made by the same person
Don’t exceed £50
(Excluding VAT)
In any 12m period
VAT: Are trade samples taxable supplies?
No
VAT: Are gifts of services taxable supplies?
No
VAT: Discounts
VAT on discounted price
(Because always calculated on price customer actually pays)
VAT: Prompt payment/settlement discounts
2 choices:
- Supplier charges full VAT
Then credit note - Supplier details both prices on invoice
And notes customer can only recover input VAT on amount actually paid
If discount it taken then supplier must adjust their records
VAT: Private fuel for employees
(Both business and private purposes)
Input VAT
Can recover all input VAT
VAT: Private fuel for employees
(Both business and private purposes)
Output VAT
Charged at a scale rate
Based on
CO2 Rating of car
(Compensates for VAT reclaimed on fuel used privately)
(Multiply scale rate by 1/6 to obtain outfit VAT that will be included on trader’s VAT return)
VAT: Bad debts
Can reclaim output VAT if:
Debt is at least 6m overdue
And
Debt has been written off in seller’s books
VAT: Recovery of pre-registration VAT: Goods
Must be acquired for business purposes
And should not be sold or consumed prior to registration
(I.e. should still be in stock)
Acquired less than 4m before registration
VAT: Recovery of pre-registration VAT: Services
Must be supplied for business purposes
Supplied less than 6m before registration
Can input VAT be recovered for cars
No
Unless 100% for business purposes
E.g. cars for driving school
Can input VAT be recovered for non-business items
No
Can input VAT be recovered for VAT items for which no VAT receipt is held
No
Can input VAT be recovered for business entertaining
No
Can input VAT be recovered for business entertaining: Exceptions
- Staff entertaining
- Entertaining foreign customers
