VAT Flashcards
If a business use of an asset has an element of private use, how do you treat recovering input tax?
Input tax cannot be recovered
What is Test 1 of the simplified partial exemption test?
- Total input tax =< 625 pm on average
- Exempt supplies =< 50% of all supplies
What is Test 2 of the simplified partial exemption test?
- Total input tax less input tax attributable to taxable supplies =< 625
- Exempt supplies =< 50% of all supplies
What is the standard partial exemption test
Total taxable supplies/Total supplies = %
% x non-attributable input tax = taxable
When can exempt input VAT be recovered?
If de minimus is met, see Hardmans 273
When does the capital goods scheme apply?
When a business spends a large sum on a non-current asset used to make both taxable and exempt supplies
What can be initially recovered under the capital goods scheme
- Wholly taxable use - 100% input VAT
- Wholly exempt use - 0% input VAT
- Partly taxable use - can recover proportion based on taxable use in the quarter
How do you adjust the input VAT recoverable under the capital goods scheme? What about on sale?
Total input VAT / 10 or 5 yrs x (% now - % on initial recovery)
- on sale, you also do (full interval years - intervals passed)
What adjustments are made for the sale of goods under the capital goods scheme?
- If disposal was taxable - assume 100% taxable use
- If disposal exempt - assume 0% taxable use
What property transactions are exempt from VAT?
- sale of land
- lease of any building
- sale of >3yr old commercial building
- sale of existing residential building
What property transactions are zero rated?
- construction and sale of new residential buildings
What property transactions are standard rated?
- construction of commercial building
- sale of new (<3yrs) commercial buildings
- owner of commercial land and buildings can opt to waive the exemption of VAT
For the capital goods scheme, when does the first interval run until?
To the end of the VAT period (should be in question)
VAT implication of a commercial building owner opting to tax:
If they opt to tax then the building become standard rated and:
- they can recover input VAT on construction - would not be able to do this otherwise as the construction is exempt
- can recover input VAT on rent charged
- tenants VAT registered can recover input VAT
- exempt tenants can not recover any input
- option to tax is irrecoverable for 20 years
- option to tax can be revoked in the cooling off period (first 6 years)
- sale of building within 20 years is standard rated - buyer can only recover if they also opt to tax
How should the dispatch of goods in the EU be treated if the customer is VAT registered?
- supply is zero rated (if VAT number quoted in invoice and proof it has gone to the EU)
- customer pays local rate
How should the dispatch of goods in the EU be treated if the customer is NOT VAT registered?
- charge 20% on supply
What are the VAT implications of exports OUTSIDE the EU?
zero rated if there is evidence of where it is going
What are the VAT implications of imports OUTSIDE the EU?
- importer accounts for VAT at their local rate
- if they are VAT registered then can recover
Up to how long can VAT be recovered on services performed before registering for VAT?
6 months
Up to how long can VAT be recovered on goods purchased before registering for VAT?
4 years
Can input VAT be recovered on entertaining suppliers?
no
What is multiple/composite supply?
When an item is purchased that has 2 identifiable elements that are treated differently for VAT (e.g a course that is zero rated and the purchase of books for that course which is standard rated)
What is single supply?
When a package is purchased and the elements are not easily identifiable and the smaller elements are insignificant to the main element (meals on a flight)
Is there any sale adjustment under the capital goods scheme if the seller opts to tax before selling?
No
What is the criteria for a VAT group?
Under common control, i.e 51% group companies and have a fixed establishment in the UK
Why should companies selling standard rated goods be included in a group together?
Reduces administration as intra-group sales are not subject to VAT and therefore only one return is required
Why should zero rated traders be excluded from VAT groups?
Leaving them out will retain the monthly cash flow advantages from monthly returns
Why should/could exempt traders be excluded from VAT groups?
- it would affect the partial exemption status of the group and may restrict recovery of input VAT
- if the company is de minimus, then it can be included as it will not affect the recoverability of input VAT
Is input VAT recoverable on zero rated supplies?
Yes, as it is still a taxable supply
