VAT Flashcards
Formula for VAT
Output (sales) - Input (purchases) = VAT
Exclusive= 20%
Inclusive= 1/6
What is the partial exemption test? (part standard part exempt)
Determines how much tax can be recovered. You can recover all tax if two tests passed:
Test 1- Input tax below £625pm AND exempt supplies less than 50%
Test 2- Input tax - tax directly attributable to taxable supplies less than £625pm AND exempt supplies less than 50% of ALL supplies
What happens if partial exemption test failed? (3 steps)
Make a proforma.
Columns for taxable, exempt, total
Rows for: Wholly attributable input tax (standard, zero-rated,exempt)
then work out non-attributable VAT with this formula:
SR and ZR / Total supplies = % × Non-directly attributable input VAT
VAT exclusive figures and round up and remove sales of capital assets
Add another set of rows for: non attributable VAT (SR, Zero, Exempt)
Total up
De-minimus (recover all tax) passed if exempt total is below £625 and and doesn’t exceed 50% of total column otherwise only recover taxable
Give 3 VAT rules on property
SR- construction and sale of new commercial buildings (under 3 years)
ZR- construction on NEW residential buildings. This means no output tax charged and input on expenses can be recovered
Exempt- Lease of any building, sale of existing residential buildings and sale of old commercial buildings (over 3 years). Cannot charge VAT on the rent or recover input tax
What is OTT?
Making EXEMPT properties taxable e.g. charging VAT on sale or lease but being able to recover input tax on purchase/running
What are the conditions of OTT (3)?
relates to whole building
cannot be changed for 20 years
on individual buildings and doesn’t transfer with sale of building
What are consequences of OTT for leased property (3)
Owner must charge VAT on rent
Owner can claim back input (cost of building)
If owner sells within 20 years- must charge VAT on sale
Where does fuel scale charge go?
Under output at 20%
