VAT 2 Flashcards
Explain Capital Goods Scheme
What assets are covered
What is the adjustment period
when business spends large sums on NCA making taxable and exempt supplies. HMRC required you to adjust usage of NCA over period as you can claim back VAT on portion of use
Assets covered: land and buildings more than £250,000 (find in hardman’s). Other items are more than £50,000
10 yrs for Land and Buildings. 5 yrs for rest
Explain initial recovery and annual adjustment for capital goods scheme
Initial recovery= Input VAT x usage for taxable supply
Adjustment= Input VAT/10 x (new usage-old usage)
Do this for every period facing usage changes but be clear when no adjustments needed
Recover more if use increases
How do you adjust for sale in capital goods scheme?
normal adjustment usual formula
recognise final adjustment for remaining intervals
Remaining intervals relates if sale was taxable or exempt (refer to VAT treatment i.e. is it less than 3yrs old. If taxable (sr/zr) then 100% usage and if exempt then 0%)
Adjustment=Input VAT/10 x (100-first usage) x remaining period
What is the flat rate scheme?
Aimed towards smaller companies- calc total output VAT by sales x % given by HMRC
(SR (vat inc) + Reduced Rate (vat inc) + zero rated + exempt supplies) x Fixed rate= VAT payable
First year: % is lower by 15
o Limit= £150,000 to join but over £230,000 means you must leave
What is a limited cost business?
VAT calc under flat rate using 16.5% rather than based on the business (SR, ZR, E)
It is one with VAT inclusive cost of relevant goods of:
Less than 2% of VAT inclusive turnover or greater than 2% of VAT inclusive turnover but less than £1000py and £250 per quarter. Measured quarterly
Relevant goods= used excl for purpose of business other than capital items
purchase x 1.2 (check if greater than limit)
Give rates for exports and treatments for imports (2) relating to supply of goods
Exports are zero rated (taxable at 0%)
Imports have two treatments
Postponed VAT- (most likely) option only for registered company. No VAT on purchase but trader charges output tax when doing VAT return and adds to liabilities. If it relates to taxable supply then can reclaim input (add to output and input in calc)
VAT at entry- before Jan 21 incl individuals and those not registered. VAT payable when goods enter UK. If relate to taxable supply then can be reclaimed
How do you treat supplies of services
Service from UK to overseas:
if non business customer then charge UK rate VAT
if business customer then no VAT to account for as sale treated as abroad
Service from overseas to UK:
if bought for business- treat as made in UK then apply reverse charge (VAT on input and output
if bought not-business- charged at overseas
When can you reclaim tax on costs incurred prior to registering
Services- 6 months before starting
Goods- 4 years provided used for business purposes and still at hand
Cannot reclaim for entertaining suppliers
How do you treat a flight which offers food
Flights are zero rated and the food offered is an ancillary supply- meaning it provides support to a primary activity. Also refund is not offered and price of flight is not lowered if reject offer, therefore it is a single supply
