VAT

Question 1

What types of VAT are outside scope and exempt?

Answer 1

Outside scope- dividends and salaries
Exempt - insurance

Question 2

What types of VAT are zero rated or reduce rate? What is rate?

Answer 2

Zero rated- food or kids clothes
Reduce rated - domestic utilities at 5% added to sales price

Question 3

How do you calculate VAT exclusive figure?

Answer 3

Standard- 20/120
Reduced - 5/105

Question 4

How do you know if someone is required to register for VAT?

Answer 4

Historic and future prospect test
1. Will taxable supply exceeded limit in previous 12 months
2. Will taxable supply exceed limit in the next 30 days

Limit is £85,000

Question 5

When do you notify HMRC in regards to historic testing? When is it effective?

Answer 5

Within 30 days of end of month and is effective from day of next month

Question 6

When do you notify HMRC in regards to future prospect testing and when does it become effective?

Answer 6

Notify HMRC by end of 30 days and effective when you become aware

Question 7

What is excluded from taxable supplies?

Answer 7

VAT, exempt supplies, outside of scope, sale of capital asset

Question 8

How often do you file a VAT return?

Answer 8

Quarterly

Question 9

What is the basic tax point and the actual tax point?

Answer 9

BTP- when goods are made available
ATP- if a tax invoice has been issued or payment received before BTP.

If invoice has been issued within 14 days of BTP ATP equals invoice date

Question 10

How do you treat output VAT on drawings and gift and private fuel? What about trade samples or gifts or service?

Answer 10

1. Charged on replacement cost
2. Charged on scale rate (co2)
3. Not taxable supply

Question 11

When can a seller reclaim output VAT on bad debts? What is it classed as?

Answer 11

It is classed as input to VAT

If that overdue by six months or written off in sellers books

Question 12

List four goods where input VAT cannot be recovered

Answer 12

Cars (unless for driving school)
Non-business items, lost receipts, business entertaining (except for staff or foreign customer)

Question 13

When is the VAT payable by?

Answer 13

One month and seven days after end of quarter

Question 14

What are substantial traders?

Answer 14

That liability exceeded in 2.5 mil. Must make POA.

Question 15

In regards to substantial traders what is paid in months two and three of every quarter?

Answer 15

1/24 of annual liability for prior year

Question 16

What is the annual accounting scheme? What are the two options for POA?

Answer 16

When one VAT return submitted.

Two options for POA

1. 9 payments due at end of month 4 to 12 and 10% of last year liability
2. Three payments due at month for 710 and 25% of last year liability

Question 17

What is the cash accounting system? (VAT). What are the conditions to join?

Answer 17

VAT accounted for based on cash receipts and payments, not invoices.

It can be used with annual accounting scheme

Turnover threshold to join is £1.35 million in following 12 months threshold to leave is £1.6 million

Question 18

How long should records of goods and services supplied be kept for VAT purposes?

Answer 18

Six years

Question 19

What is the formula for the flat rate VAT scheme? What are the conditions?

Answer 19

VAT due = Total turnover (VAT Inc) x flat rate %

This percentage is reduced by one in first year.

To join turnover limit excluding VAT should be over £150,000

Must leave if total income including VAT exceeds £230,000

Question 20

When can an error be corrected in VAT?

Answer 20

If small.

Small means less than 10,000 and 1% of taxable turnover exclusive of that.

Question 21

What can’t input VAT be claimed on?

Answer 21

Client entertaining
cars
non-business items
no receipt