VAT and business documents Flashcards
When must a VAT registered business give or send a VAT invoice to a purchasewr ? P27
- 30 days of the earlier:
- supply
- receipt of payment
What MUST a vat registered business have to be able to claim back input tax ? P27
- Valid VAT invoice - supplier
- contents HMRC guide
What must a full VAT invoice show ? P27 - 10 POINTS
- Sequential number
- date
- tax point
- supplier - name , address, and VAT number
- customer - name and address
- description : - quantity , vat per item , payable (exc vat) , disciunt per item
- net amount
- discounts
- VAT amount
- unit price/ rate
When is a VAT invoice deemed to have been issued ? P30
- Handed or sent to customer
What are the advantages of electronic invoices ? P30
- Instant
- Retrieval
- Reduced and postage
- improved cash flow
- secure transfer
- dispute handling
What formats can electronic invoices be in ? P30
- XML
How must businesses that supply goods/services zero rated or exempt from VAT display those items on the invoice ? P30
- Must show - no vat
- shown separately
What are invoices that only have zero rated / exempt supplies ? P30
Not VAT invoice
When can a simplified invoice be issued ? p30
Total value £250 or less
What should be included on a simplified invoice - 6 points ? P30
- Sequential invoice number
- Supplier name and address
- tax point
- description
- VAT rate per itm
- Payable - each rate - including VAT
Can a simplified invoice include any exempt supplies on it ? P31
No
What are modified invoices ? P31
- Inclusive product price
- £250 totalling more
When can a modified invoice only be issued ? P31
- Customer agrees
- Direct to customer rather than business
When would a VAT invoice not be needed ? P31
- Buyer not registered
- seller is retailer
- free sample
- self-billing
What is a pro forma invoice ? P31
- document - goods at certain price
- payment - goods supplied and normal invoiced after
Why would a seller issue a pro forma invoice ? P31
- credit risk
- payment up front
What is the main difference between a pro forma invoice and a normal invoice ? P31
- Cannot reclaim
- ‘Not VAT invoice’
- separate vat invoice
Why may some consumers need a VAT receipt from a seller ? P33
- Business expense
- to reclaim
What must a VAT reciept show ? P33
- Retailer - name, address, VAT no
- item with different VAT - separate
What are the 4 main VAT calculations to consider ? P34
- Different rates
- Rounding
- content of figure
- after discount
How is the VAT automatically calculated ? P34
- Software packages
- Coded for invoice- correct rate
- electronic tills - barcode/ prodce code
What is a problem that arises when calculating VAT manaully ? P34
Rounding issues
What does the HMRC permit when rounding VAT P34 ?
- Round down total
- nearest whole penny
How should the VAT of each line on an invoice be rounded ? P34
- Up / down - nearest 0.1pence
When would you have to calculate VAT included in the total of an invoice ? P35
- Invoice - figures including VAT
Not separately identified
What is the calculation for finding the VAT element of the gross amount ? P35
(Gross amount/ 1.20) * 0.20 = vat amount
What is an alternative way of calculating VAT elements ? P35
- Fraction
- 20/120 = 1/6
- divided by 6
What would the alternative calculation be for the reduced rate of vat ? P35
- 5/105 = 1/21
- divide by 21
Where are the current VAT fractions published ? P35
- HMRC VAT guide
What does the HMRC require about processing VAT and Trade discounts ? P36
- Invoiced amount after discount
What does the HMRC require about processing invoices and prompt payment discounts ? P36
- money customer pays
What are the alternatives to dealing with a prompt payment disocunt ? P36
- Issuing a credit note
- statement included on the invoice
How does issuing a credit note account for ppd? P36
- lower amount of VAT - HMRC
- credit note to customer
How does a PPD statement included on the invoice account for VAT ? P36
- statement - terms of PPD
- only recover - actual VAT amount
What is the tax point for a taxable supply ? P38
Date supply took place
What are the two types of tax points that the HMRC makes a distinction between ? P38
- Basic tax point
- Actual point
What is the basic tax point for businesses that supply goods ? P38
- Despataches goods
- collect them
- makes them available (assembly)
What is the basic tax point for a business that supplies services ? P38
- Service carried out
- work is completed
When can the rules for basic tax points be set aside ? P38
- Actual tax point
What is the actual tax point/ when does this apply ? P38
- Invoice issued within 14 days - basic tax point
- Invoice date = actual tax point
- later date
What are advance payments in the context of tax points ? P38
- VAT invoice issued/ payment received - before basic tax point
What is the actual tax point the earlier of, when advance payment is received ? P39
- Date of VAT invoice
- date advanced payment received
When would the business include VAT on the reutnr , for advanced payments ? P39
- Actual tax point for payment
What is the actual tax point for purchases with a deposit put down by the customer ? P39
- VAT invoice issued - for deposit
- date deposit received
When would a business account for VAT for the deposit on the VAT return ? P39
- Tax point occurs
What can happen if a business supplies service to a customer on a continuous basis ? P39
- Issue invoices regularly
- tax point - everytime invoice is issue/ payment made
What is sales/ return ? P40
- agrement with supplier
- payment - goods actually sold
- unsold goods = return
What is the tax point for goods on sale or return ? P40
- Adoption date
- date of payment (not deposit)
- 12 months - Goods sent
What is payment by instalment ? P40
- instalment - agreed period of time
- property until full payment - conditional sale
- basic tax point creation = goods handed over
- full value
*
Why is the principle of tax point important to a vat registered business ? P40
- consistent and accurate -
- improved cashflow reclaim
- special VAT schemes eligibility
