VAT Flashcards
Which items cannot be reclaimed for input VAT ?
(4)
Client entertaining (unless overseas clients)
Cars
Non-business items
Items where no receipt is held
Can you register if you make only exempt supplies?
No
What is a BTP?
The date goods have left inventory
The date services have been completed
If no tax invoice has been issued or no payment has been received, what is the Tax Point?
Has invoice been issued within 14 days after BTP?
Yes > ATP is invoice date
No > BTP
Under the historic turnover test, when should HMRC be notified of registration and when should VAT be charged from?
Notification: Within 30 days
Effective charging: from first day after end of month in which limit exceeded
Under the future turnover test, when should HMRC be notified of registration and when should VAT be charged from?
Notification: By end of the 30 day period
Effective: Immediately
When should a trader notify HMRC if they cease to trade?
Compulsory VAT deregistration
Within 30 days, from date of cessation
What items is output VAT charged on? (6)
- Standard rate
- Reduced rate
- Discounted sales
- Goods taken for own use
- Gift of goods
- Private fuel for employees
How should you charge output VAT on discounted sales?
Charge full amount of VAT on undiscounted price,
Issue credit note if prompt payment discount is taken
How should you charge output VAT on goods taken for own use?
VAT is charged on full replacement cost of supplies
How should you charge output VAT on Gifts?
VAT charged for gift of stock / fixed asset at replacement value
Gift of supplies are NOT taxable
How should you charge output VAT on private fuel for employees?
VAT is charged at a scale rate (given)
Can input VAT on Bad Debts be recovered?
Yes
How should traders with a VAT liability > £2.3m pa pay their VAT?
Substantial traders
POA [of each quarter]
1st POA: end of month 2
2nd POA: end of month 3
Balancing: end of month 4
How is the VAT liability POA calculated?
POA = 1/24 of annual liability in previous year
What is the ‘Cash Accounting Scheme’ ?
VAT is accounted on cash basis instead of a tax point basis.
What are the limits under the Cash Accounting Scheme?
- Taxable supplies (zero / reduced) < £1.35m in the following (next) year
- Taxable supplies > £1.6m in the previous 12 months, trader must leave the scheme
What is the ‘Annual Accounting Scheme’ ?
1 VAT return submitted each year within 2 months of PE
What are the options of VAT payments under the Annual Accounting Scheme?
- 9 payments: months 4 - 12, balancing payment with submission of return.
- 3 payments: months 4, 7, 10 of the VAT year, balancing payment with submission of return.
Look out for … to identify payment dates:
Annual accounting scheme
- monthly or quarterly payments?
- VAT YE
What is the ‘Flat Rate Scheme’ ?
Net VAT due = flat rate % x Gross turnover (VAT inclusive)
No separate input VAT recovery
What is the criteria to claim input VAT on items before registration?
- The items are still in inventory / still in use
- Purchased within 6 years
When are the VAT returns and payments due?
1 month and 7 days after end of quarter
If there is an error and output VAT has not been charged, who is liable to pay and on what price is VAT calculated?
- Trader is responsible to pay
- Selling price (incl VAT)
Are these items taxable?
1. Gift of services
2. Gift of goods
3. Personal use of goods owned by business owner
4. Services supplied to business owner
- Not taxable
- Taxable
- Taxable
- Taxable
A registered VAT company buys a car which includes ‘ vehicle excise duty’ (incl VAT).
What is the capital allowance for the acquisition cost?
capital allowance = Vehicle cost - excise duties
If a sole trader has 2 businesses, both has taxable supplies but only 1 exceeds the threshold.
Are both businesses relevant in registering for VAT?
Yes, the sole trader is the taxable person and would have 1 registration for both businesses.
Are zero-rated supplies eligible for output VAT?
Yes, they are just charged at 0%
What happens to your deemed supply of trade stock and capital items once you reach the de-registration limit?
On deregistration, there is deemed supplies previously recovered. Output VAT is payable on this supply > £1,000
What are the restrictions on, for example a computer provided to an employee for 10% personal use?
There is no personal use restrictions as it is a valid expense of the business
What is the cost to the company of a car for capital allowance purposes?
Input VAT is not recoverable on cars and accessories unless the car is used for 100% business
I sell clothes, I gave a coat that I brought for £120 to Alex. The selling price of this coat is £200 (incl VAT).
What is the value of the coat for VAT purposes?
Cost x 100/120
I dispatch goods sold on 20 Feb, on this day I receive 10% deposit (incl VAT).
Invoice for full amount issued on the 1 Mar. The balancing payment was received on the 10th Apr.
How much VAT must be accounted for, for:
1. Quarter to 29 Feb
2. Quarter to 31 May
- Tax point 1: 20th Feb = deposit x 1/6
- Tax point 2: 1st Mar = balancing payment x 1/6
What happens if there are errors on a VAT return?
Taxpayer
A taxpayer can adjust on the next VAT return if below limit of:
Greater of £10,000 or 1% of turnover (max £50,000)
What is the period for ‘Repayment of interest on overpaid tax’
From later of actual date paid or due date to day before repayment
What is the time limit for keeping VAT records?
6 years
What are the responsibilities of a newly registered trader? (4)
- Charge output tax on taxable supplies
- Quote VAT reg number on all sales invoices
- File a return every quarter
- Maintain appropriate VAT records
Does a gift of inventory or fixed asset that replacement’s cost less than £50 to a single person qualify for VAT?
NO
