VAT Flashcards
How is VAT applied to sales?
Added to sale price and paid to HMRC
How is VAT applied to purchases?
VAT chargeable can be returned on pruchases
What is a taxable supply?
A supply on which output tax is charged and input tax is recoverable
What is an exempt supply?
A supply upon which no output tax is charged, and inout tax is not recoverable.
E.g. land, insurance and postal services
What are the three bands of VAT?
Standard rate - 20% - any taxable supply which is not 0 or reduced rate.
Reduced rate - e.g. domestic fuel
Zero rated - 0% - basic food, books, childrens clothes
What are some examples of taxable supplies that output VAT will be charged?
Sales of goods/services
Gifts of goods unless <£50 or trade samples
Goods permanently taken out of a business for private use by the owner or employee
Motor fuel provided to employee
What is the threshold for compulsary registration?
Total value of taxable supplies exceeds £85k, doesn’t include supplies of capital assets of the business.
What is the historic test?
At the end of any month, the taxable turnover for the previous 12 months exceeds £85k
Notify HMRC within 30 days of the end of the month in which the threshold was exceeded, e.g. Feb relevant month, notify by March 30th
Registration takes effect from the 1st day after the end of the month following the relevant month.E.g. Feb relevant month, 1st April registration date
What is the future prospects test?
The person must register for VAT if, at any time, there are reasonable grounds for believing that the taxable turnover in the next 30 days alone will exceed £85k.
Registration takes effect from the beginning of the 30 day period.
What is voluntary registration?
Self explanitory
Must be making taxable supplies
Main advantage is the ability to recover input VAT
When is deregistration compulsary?
If a person ceases to make taxable supplies and has no intention of making taxable supplies.
Must notify HMRC within 30 days
Stops charging and claiming VAT
When is a person eligible for voluntary deregistration?
If estimated turnover for the next 12 months won’t exceed £83k
When is the basic tax point?
The date of which goods are removed or made available to the customer
When is the tax point (in order)?
Payment recievedd before goods/services provided
Invoice issued before goods/services provided
Invoice issued within 14 days after goods/services provided
What is the value of supply?
The VAT exclusive amount that would be payable by the person making the supply at that time to replace the goods.
How are discounted supplies calculated?
Calculate VAT on sales after any discounts taken up by the customer
What is the fuel scale charge based on?
Based soley on CO2
When is bad debt relief available?
If the invoice is more than 6 months overdue since due date
If the debt has been written off in the supplier’s accounts
VAT reclaimed in the supplier’s VAT return together with the input tax on purchases
Claimed within 4 years of becoming eligible
How is pre-registration charged?
Charge after registration to reclaim input VAT
Don’t charge before, can’t reclaim
If the historic test is passed, when does registration take effect from?
First day after the end of the month following the relevant month
E.g. Feb relevant month, charge from April 1st
What is output vat?
Business making taxable supplies will charge customers VAT at rates of either 0,5,20
What is input VAT?
Business making taxable supplies will reclaim Vat paid on purchases used to make said supplies
What are the conditions that must be met to claim input VAT?
Must have VAT invoice
Goods/Services purchased for business use only
Providing goods/services to employees is considered business use
What can input VAT not be recovered on?
Cars available for private use
Third party entertaining
What can input VAT be reclaimed on?
Goods purchased up to 4 years before registration
Services purchased up to 6 months before registration
How is VAT payable/repayable calculated?
Output-input
What supplies are outside the scope of Vat?
Wages and dividends
What is the VAT fraction?
Used to calculate VAT when given inclusive price
Inclusive x 1/6 = VAT
How are sole traders assessed if they have multiple businesses?
Assessed on all businesses
Are goods taken out the business by an owner liable to VAT?
Yes
If someone drops below the VAT threshold what are the implications?
May choose to deregister but would then need to pay output VAT on the deemed supply of stock/capital still held at deregistration if valued above £1k
Are gifts of a service to a customer deemed a supply for VAT purposes?
No
Are accessories fitted when supplied on cars recoverable?
Not if there is any element of private use
Does a business only making 0 rated supplies have to register for VAT?
No they can be exempt
If a business ceases to make taxable supplies (exempt only) what happens with regard to dergistration?
Deregistration effective immediately and notify HMRC within 30 days
What are the conditions for output VAT to be recovered on an unpaid invoice?
Debt must be more than 6 months old and written off in the accounts
What is the basic tax point for good on sale or return?
Basic tax point is the adoption date (max 12 months later)
