VAT

Question 1

What can businesses do with the input tax they pay to suppliers?

Answer 1

Offset it against the output tax they charge to customers

output minnus input

Question 2

What is a limitation for businesses that only make exempt supplies?

Answer 2

They are unable to recover input tax

Question 3

What type of supplies are considered exempt for VAT?

Answer 3

• Residential property that are not newly constructed
• Commercial property over 3 years old and the owner has not opted to tax

Question 4

What type of supplies are zero-rated for VAT?

Answer 4

• Newly constructed residential property

Can still recover input from HMRC

Question 5

What are standard-rated supplies in the context of VAT?

Answer 5

• Newly constructed commercial property (less than 3 years old)
• Older commercial property where the seller has opted to tax

Question 6

Why could VAT treatment of property be a concern for buyers?

Answer 6

The buyer may not be able to recover the VAT

Question 7

What does Condition 2 of SCPC state regarding property VAT treatment?

Answer 7

By default, the property is standard rated

This is the default

Question 8

What is the purpose of Tickbox A1 in the SCPC?

Answer 8

Overrides condition 2 and says that the property is not subject to VAT. The Seller also agrees not to exercise its option to VAT.

Question 9

What does Tickbox A2 pertain to?

Answer 9

Transfers of Going Concern - this is not a taxable supply

Question 10

What conditions must be met for a transfer to qualify as a Transfer of Going Concern?

Answer 10

• The seller uses the property for the business of letting to produce rental income
• The buyer will do the same