VAT and Corporation Tax

Question 1

Value Added Tax (VA) - key points:

Answer 1

• VAT is chargeable on taxable goods and services (taxable supplies) made in the UK when acquisitions are made from businesses in the EU and when goods are imported to the UK from outside the EU.
• Services are deemed to be supplied in country when the customer receives them. UK VAT chargeable on overseas services delivered to UK resident.
• VAT administered by HMRC
• 0% rate and 20% rate.
  
  • Some items have 5% rate and some supplies are exempt from VAT.

Question 2

VAT system - input VAT and output VAT - key points:

Answer 2

• Input VAT is paid on taxable supplies purchased.
• Output VAT is paid on taxable supplies sold.
• The excess of output VAT over input must be paid to HMRC, while the excess of input VAT can be reclaimed.

If a trader makes exempt supplies or both exempt and taxable supplies, the amount of VAT they can claim may be limited.

Question 3

VAT registration - key points:

Answer 3

• Where the value of taxable supplies in the last 12 months is more than £85,000 a trader must tell HMRC within 30 days of the end of the month where the limit was exceeded.
• They will then be registered on the 1st day of the 2nd month after exceeding the limit.
• Voluntary registration is available for traders with taxable supplies under £85,000.

Example

Jane’s taxable supplies exceeded £85,000 on 30 September 2020. She should inform HMRC within 30 days of that date and be registered from the 1st November 2020.

Question 4

Collection of VAT - key points:

Answer 4

• VAT returns must usually be submitted and tax owed paid quarterly (every 3 months).
• Regular claimers and some large companies submit monthly.
• MTD is generally used by firms with a turnover of more than £85,000.
• Returns should be submitted via MTD by 7th of month after the month following the VAT period.

VAT period ending on 31st January, return must be submitted by 7 March 2021.

Where taxable supplies are £1.35m or less, can complete annual return. Make 9 monthly / 3 quarterly payemnts on account with final adjustment on year end return.