VAT Flashcards
Value added tax (VAT):
A tax payable on the consumption of goods and services by the final consumer.
Output VAT:
As the goods or services go through the production and distribution process, each VAT- registered business charges VAT on the value of the goods or services it supplies.
Input VAT:
Each VAT-registered business receives credit for any VAT that it has paid
Taxable supply:
Any supply of goods or services made in the UK other than an exempt supply or a supply outside the scope of VAT.
Taxable person:
A person making taxable supplies who is, or who is required to be, registered for
VAT. Person includes a sole trader, a partnership (not the individual partners) and a company.
Supplies outside the scope of VAT:
Supplies that do not have any effect for VAT.
Exempt supplies:
A supply on which output VAT cannot be charged.
Future prospects test for VAT:
Under 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 the threshold.
Historic test for VAT:
Under the historic test, a person must register for VAT if, at the end of any month, the taxable turnover in the prior period exceeds the threshold.
Tax point for VAT:
VAT becomes due on a supply of goods or services at the time of supply.
Cash accounting scheme:
The cash accounting scheme allows businesses to account for VAT on the basis of cash paid and received, rather than on invoices received and issued.
Flat rate scheme for VAT:
The flat rate scheme allows businesses to calculate net VAT due to HMRC by applying a flat rate percentage to their VAT-inclusive turnover rather than accounting for VAT on individual sales and purchases.
Simplified VAT invoice:
A ‘less detailed’, or simplified, invoice can be issued for supplies under £250.
Modified VAT invoice:
A modified invoice can be issued for retail supplies over £250.
