VAT

Question 1

Why would HMRC treat a supply as a single (composite) supply?

Answer 1

• If one part of the supply is merely incidental or ancillary to the main element, or a means of better enjoying the main element it should be treated as a single (composite) supply.
• In this case, the VAT rate applying to the main supply would apply to the whole supply.

Question 2

Why would HMRC treat a supply as a multiple supply?

Answer 2

• If the elements are separate and clearly identifiable but have been invoiced together at an inclusive price for both elements.
• In this case, each element is considered separately and the VAT on the different elements would be calculated by splitting the total in a fair and reasonable manner.

Question 3

What are the two main methods for apportioning VAT for multiple supplies?

Answer 3

1. Split the amount based on the cost to Roger

2. Split the amount based on the open market value of each element.

Question 4

What does opting to tax mean for future transactions relating to a property? (4)

Answer 4

• The property will not be exempt from tax and VAT will be due in future transactions
• If VAT is not mentioned in the sale and purchase agreement, the price paid will be treated as being the VAT inclusive price. However, the seller and buyer could agree to treat the proceeds as VAT exclusive, in which case the buyer will owe the amount to the seller. They can reclaim it.
• The VAT is due from the seller to HMRC.
• Provided the seller issues a VAT invoice, the buyer can reclaim the VAT if it provides standard-rated supplies

Question 5

When must HMRC be notified of a liability to register for VAT?

Answer 5

Future prospects: A person is also liable to register at any time if there are reasonable grounds for believing that the value of his relevant acquisitions in the period of 30 days then beginning will exceed the given limit.

Question 6

From when is VAT registration effective?

Answer 6

30 days before HMRC needs to be notified.