VAT Flashcards
Define exempt supplies
non-taxable supply on which output VAT cannot be charged
Can a person making only exempt supplies register for VAT?
No - therefore cannot recover on input
Taxable supply definition
Any supply of goods or services made in the UK other than an exempt supply or supply outside the scope of VAT
Zero - rated supplies
output VAT 0%
can a supplier who makes only zero rated supplies be VAT registered?
Yes and can claim input repayment
Output VAT
VAT Charged on goods/services
Input VAT
VAT suffered on purchases
Supply of goods?
Supply of power/heat/refrigeration / cooling / ventilation / water
Yes
Supply of goods? Grant assignment or surrender of major interest (freehold / lease for over 21 years in land)
Yes
Supply of goods
Gift of business assets
Yes
except < £50 gifted for business
samples
supply of services
temporary use of businesses assets for non-business use
Yes
Supply of services
services supplied to trader on which input tax claimed used for private/non-business yes
Yes
VAT
Ancillary element
supply is incidental to the main element, or better means of enjoying that main element 0 single supply
VAT
single economic supply
If various elements are so closely linked they form a single indivisible economic supply, artificial to split p regarded as single supply with one VAT rate
Two or more companies can be treated as a VAT group if each is established/has fixed establishment in UK and
- one controls the other
- one person (indivdiual/holding company) controls all or
- partnership control all
VAT Group
Control
Shareholding > 50%
representative member of a VAT group is responsible for
accounting for VAT on behalf to he group, submitting VAT returns, paying excess VAT to HMRC
Advantages of being in a VAT group
no VAT on intragroup supplies
only one VAT return (admin cost savings possible)
If small, wholly exempt entity included, may be possible to recover input under de minimis partial exemption rules for the group as a hwole
Disadvantages of being in a VAT group
All entities jointly and severally liable for VAT, if one becomes insolvent, the rest become liable for its VAT
having to make one return can cause difficulties collating info required
being in an exempt or partially exempt entity may lead to restriction of input taxes
If total VAT for exempt supplies is less than de minimis limits, all input VAT can be recovered in full - for what are they?
£625 per month on average
proportion of VAT on exempt supplies < 50% all input for period
Simplified VAT tst
Monthly average input < 625
Monthly average total input less input tax directly attributable < 625
VAT three conditions for annual test
business must
- pass de minimis test for previous partial exemption year
- consistently apply annual test throughout any given partial exemption year
- have reasonable grounds for not expecting to incur more than £1m input tax in current partial exemption year
Zero rated/exempt/standard rated
Construction of new residential building
zero rated
Zero rated/exempt/standard rated
Sale/lease>21years of new res building
Zero rated
Zero rated/exempt/standard rated
Sale of new residential accommodation created by conversion of non-residential building if sold by person doing the conversion
zero rated
Zero rated/exempt/standard rated
sale of existing residential building
Exempt
Zero rated/exempt/standard rated
Most leases on residential buildints
Exempt
Zero rated/exempt/standard rated
Work on existing residential building
Standard rate
Zero rated/exempt/standard rated
renovation of dwellings empty for at least 2 years
reduced rate 5%
Zero rated/exempt/standard rated
Conversion of res building to number of dwellings
reduced rate 5%
Zero rated/exempt/standard rated
conversion of non-res to dwellling/number of dwellings
reduced rate 5%
Zero rated/exempt/standard rated
Construction of commercial buildings
standard rated
Zero rated/exempt/standard rated
sale of new (<3y) commercial building
standard rated
Zero rated/exempt/standard rated
work on existing commercial building
standard rated
Zero rated/exempt/standard rated
Sale of old (>3y) commercial building
exempt, subject to option to tax
Zero rated/exempt/standard rated
Lease of any commercial building
exempt, subject to option to tax
When is option to tax revoked
automatically once person who opted to tax has held no interest for 6 years
revoked after 20 years if consented by HMRC
consequences of option to tax
SR VAT charged on sale/lease (premium and rent) of property
Any inputs related to supply can be recovered (heating, cleaning repairs)
Capital goods scheme 0 which itmes
Buildings and land with value 250k vat exclusive
aircraft, ships, boats bought 31/12/10 after costing 50k VAT exclusive
Single computer items (not software) costing £50k or more
Capital goods schemes
adjustment for use
total input vat/10 or 5 intervals * (taxable % now - original %)
Capital goods scheme adjustment for sale
2 adjustments made
- year of sale - normal as if used whole year
- further adjustment for complete internals following year of sale (100% taxable sale taxable 0% if sale exempt)
Flat rate scheme for VAT
allows businesses to calculate net VAT by applying a flat rate percentage to their VAT inclusive turnover
Business may join flat rate scheme if
value of annual taxable supplies excluding vat < £150,000
advantages of flat rate scheme
reduce burden of admin preparing VAT return, no records to be kept
frequently less VAT payable than under normal rules
when must business leave flat rate scheme
if annual income including vat > 230,000
when is a business a limited cost business
amount spent on relevant goods inc VAT EITHER:
<2% of VAT inclusive turnover//
>2% of VAT inclusive turnover but <£1,000 pa (quarterly £250)
What are relevant goods
goods used exclusively in the business include stock, stationary and office supplies and gas and electricity.
NOT capital expenditure or supply of services like accountancy rent
when are imports chargeable to VAT
if same goods would be chargeable if supplied by registered trader in UK
Business to business services, location of
customer that is key
business to customer supplies, location of the
supplier
most services are supplied where
customer has established business
otherwise where supplier established business
