VAT & corporation Tax Flashcards
What is VAT
Value added tax
What are the rates of VAT
Zero and standard 20%
How much is the reduced rate of VAT
5%
What goods are reduced rate of VAT payable on
domestic fuel, installation of energy saving materials and certain property renovations
What is output VAT
VAT payable on goods and services sold
What is input VAT
VAT payable on goods and services purchased
Who charges customers VAT
VAT registered traders
What type of VAT does a VAT registered trader charge
output VAT on taxable supplies of goods and services
How does VAT work in practice
input VAT is offset against output VAT and any excess is paid to HMRC. any excess VAT paid is reclaimed
What is the threshold for registering to become a VAT registered trader
if value of taxable supplies on previous 12 months is more than £85k or likey to be in the next 30 days
When can you start to reclaim VAT on business related purchases
once registered
What kinds of supplies are taxable to VAT
all unless specifically exempt
what are examples of exempt supplies
insurance, finance, education and burial/cremation services
what is a partially exempt business
where a business makes exempt and taxable supplies
what are zero rated supplies
most food and drink (not catering) domestic supplies of water and sewage books and hard copy publications (not ebooks) sale of new residential buildings public transport of passengers drugs medicine and disability aids childrens clothes and footwear
What is the flat rate scheme
it allows small businesses to account for VAT as a percentage of their taxable turnover rather than the difference between input and output
what is the flat rate %
16.5% for limited cost traders but % varies according to business sector
How is the flat rate set
according to average percentage of gross sales paid over as VAT to HMRC for that sector
What is the maximum annual turnover to qualify for the flat rate scheme
£150,000 Excl VAT
What is the margin scheme
VAT scheme for dealers in second hand goods
How is the VAT calculated on second hand goods
difference between price paid for an item and the price at which it is sold
Do sales made to businesse s registered in other EU countries need to charge VAT
No
Do sales to individuals in other EU countries need to charge VAT
yes
When is the VAT accounted for on acquisition of goods/services from registered traders in other EU states
on next VAT return not on importation
What happens if a customer doesn’t pay the VAT
no immediate relief for trader
How often is VA normally paid
every 3 months
if you regularly reclaim VAT from HMRC ow often can you submit and pay VAT
monthly
what is maximum annual value of taxable supplies before you can elect fro annual tax return
£1,350,000
What else can you elect to do if your annual value of taxable supplies is less than £1,350,000
elect to pay on cash basis instead of invoice basis and can elect for annual tax return.
who pays corporation tax
companies
what is corporation tax charged on
income and chargeable gains made by companies
how i corporation tax accounted for if a companies accounting period straddles 2 financial years with different corporation tax rates
profits are apportioned
what is the current rate of corporation tax
19%
what is the maximum length of an accounting period
12 months
how are chargeable gains calculated for corporation tax
calculated according to capital gains tax rules
when was indexation allowance removed
01/01/2018
can you offset chargeable losses against trading profit or investment income
no
Are entertaining expenses included in taxable profut
yes
what do expenses have to be in order to be an allowable deduction
wholly and exclusively incurred for the purpose of business
are gift aid allowable expenses
yes
when does corporation tax have to be paid
9 months 1 day following end of accounting period
how often do large companies pay corporation tax
quarterly
What cna trading losses be offset against
other income/ chargeable gains made in the same accounting period
how far back can trading losses be carried back
preceding 12 months - must be set against current accounting period first
How long do you have to claim trading losses
2 years from the end of the loss making period
what is the maximum profit level before losses are reduced
£5 million
How is loos relief restricted if profits are in excess of £5 million
£5 millio plus 50% of profits above £5 million
what is a close company
a company controlled by 5 or less shareholders or by its directors only
what are the benefits for a close company
loans by the company to it’s proprietor are not taxable
interest on loans to buy close company shares are an allowable deduction for income tax
what is a close investment company
a close company that doesn’t trade but has investment income
When is a company incorporated overseas a UK resident
if the central management is UK controlled
