VAT Flashcards
What is VAT charged on?
- Any supply of goods or services made in the UK
- where it is a taxable supply
- made by a taxable person
- in the course of furtherance of any business carries on by that person
When is a person required to be registered for VAT?
If the value of their taxable supplies in the period of one year or less has exceeded the VAT threshold
The VAT threshold is currently set at £90,000.
What are the conditions for VAT registration regarding future supplies?
There are reasonable grounds for believing that the value of their taxable supplies in a period of 30 days then beginning will exceed the VAT registration threshold
This anticipatory registration ensures compliance with VAT obligations.
What must a person do if they exceed the VAT registration threshold?
Notify HMRC within 30 days of the end of that month and will be registered from the beginning of the second month
Can a business register for VAT voluntarily?
Yes, so VAT can be recovered, but it means the business will have to charge output VAT to customers
Under what circumstance can a business apply to have VAT registration cancelled?
Where future annual taxable supplies will not exceed the VAT deregistration threshold
This allows businesses to reduce administrative burdens if their taxable supply falls below the threshold.
What is the VAT deregistration threshold?
£88,000
What is Output Tax?
VAT chargeable when making a supply of goods or services.
What is Input Tax?
VAT paid by a person on goods or services supplied to the person.
How do VAT registered businesses offset input tax?
They offset input tax it has suffered against output tax it has charged customers.
output VAT - input VAT = amount that goes to HMRC
What is the standard VAT rate?
The standard rate is 20%.
Prices are deemed to be VAT inclusive unless contract for supply of goods or services states otherwise.
What are Standard Rated supplies?
Supplies will be charged at 20% unless they fall within one of the other three categories.
What are Reduced Rated supplies?
Limited number of types of supply are charged at 5%.
Examples include domestic heating, power, mobility aids, smoking cessation products, car seats.
What are Zero Rated supplies?
Includes food, sewerage, books, newspapers, new houses, construction of new houses, transport, clothing.
Still fall under taxable supplies, charges VAT at the rate of 0% on outputs but can recover any VAT suffered on inputs.
What are Exempt supplies?
Includes provision of insurance, finance, education, health, sale of land and buildings (unless it’s a commercial building and supplier has chosen to make the supply standard rated).
Cannot recover the VAT suffered on inputs.
What is required for a VAT invoice?
A taxable business making a standard rate supply must provide a VAT invoice to the customer within 30 days of supply and keep a copy.
How often must a VAT return be submitted?
A VAT return must be submitted every three months.
What is the due date for a VAT return?
The due date is usually within one month and seven days after the end of the VAT period.
What must a VAT return show?
It must show the total output tax charged on taxable supplies and the total input tax attributable.
When must businesses pay VAT?
Businesses must pay excesses at the same time as submitting the VAT return.
What is the requirement for businesses paying over £2.3 million in VAT?
They should make monthly payments and pay the balance when submitting the return - still quarterly return!
What is a Retail Scheme in VAT accounting?
It simplifies VAT accounting due to many customers.
What is Cash Accounting in VAT?
Businesses with an annual turnover of less than £1,350,000 may opt to use cash accounting, where output tax is accounted for when the invoice is paid rather than when it is issued.
What is Annual Accounting in VAT?
Businesses with an annual turnover of less than £1,350,000 may be permitted to make an annual return and pay VAT by instalments.
