VAT: Further Aspects Flashcards
What must a full VAT invoice include?
The word invoice
Unique identification number
Business name, address and contact info
Customer name and address
Clear description of goods/service
Date of invoice
Tax point if different
Price,
Quantity,
& VAT rate
For each item
And discount offered
Amount it charged excl VAT
Total VAT charged
Is it compulsory to issue VAT invoices to non VAT registered customers
No
Unless requested
When can a trader issue a simplified VAT invoice?
Less than of equal to
£250
VAT inclusive
When can a trader issue a modified VAT invoice?
Retail supplies
(Over £250)
How must all VAT registered businesses submit returns?
Electronically
VAT return form
VAT100
What does VAT100 show?
Total input VAT
Total output VAT
For the period
Who can opt to have shorter VAT return periods?
(To receive their repayments earlier)
Traders who regularly receive payments
What is the shorter VAT return period?
Monthly
VAT return due date
Same as for payment of VAT
(Where payment is not made by DD)
When is VAT payable?
(On TTs)
Due one month and seven days
After end of the quarter
What happens if a trader doesn’t submit a VAT return?
HMRC can issue an assessment
Showing the amount HMRC believes is due
How are VAT errors treated?
Aggregated
So that the net error is the total under-declaration of VAT less the total over-declaration
When are errors on VAT returns corrected?
On the next return
As long as it was
Small
And
Not deliberate
VAT: Small errors
Higher of:
10k
1% taxable turnover
(VAT exclusive)
Subject to a limit of 50k
Penalty for small errors disclosed on next VAT return
None
As long as neither careless nor deliberate
How are errors that are not small, or were deliberate treated?
Separately disclosed
On form VAT652
And penalties may apply
Due date for VAT return
Same as for payment of VAT
Except when payment made by DD
When are payments taken when a trader pays VAT by DD?
(In TTs)
Three working days
After normal due date
(I.e. 1m10d after end of quarter)
VAT: Substantial trader
VAT liability
Above
£2.3m
P.a.
What must VAT substantial traders make ?
Payments on account of VAT
VAT: Substantial traders: Payment timings
Months 2 and 3
In every quarter
VAT: Substantial traders: Amount of each payment
1/24th
Of annual liability
For previous year
VAT: Substantial traders: When are additional amounts due?
1m after end of the quarter
When can a taxable person receive VAT repayment interest?
Error by HMRC
Leading to:
Overpayment of output VAT
Or
Under claim of input VAT
When does VAT repayment interest run?
Later of:
Date of payment to HMRC
Due date for payment
To
Date it repayment
When does interest on unpaid VAT run?
Date should have been paid
To
Date if payment
(Exclusive)
VAT: When may a taxable person be charged interest?
- HMRC raises assessment for
Under-declared output VAT
Over-declared input VAT - Taxpayer voluntarily discloses error
That is not small
VAT: Is interest payable when small net error is corrected on the next VAT return
Provided payment for that VAT period is paid on time
No
Penalty if fails to register for VAT
/registers late/is incorrect
Common penalty regime
When does a VAT default occur?
Taxable person:
1. Files return late
2. Makes payment late
Penalty when VAT paid late
Default surcharge
VAT: Default surcharge: First default
None
What happens when first VAT default occurs? (For businesses)
Surcharge period starts
VAT: How long is default surcharge period?
12m
(Starting from end of return period)
(Usually end of the quarter)
Penalties for each VAT payment missed during surcharge period
Growing
What happens first time VAT default occurs: Businesses with taxable turnover below 150k
Letter offering help
VAT: What happens if default occurs within 12m of letter of help?
Surcharge period starts and normal surcharge system begins
(Effectively additional chance to default)
(Assume business is not small)
What happens if trader satisfies HMRC that there’s a reasonable excuse for filing a VAT return late?
The default will be ignored
VAT: What happens for subsequent defaults (return or payment)
Surcharge period extended to end 12m after end of latest period of default
If VAT also paid late, default surcharge based on outstanding amount (TTs)
VAT: Annual accounting schemes return frequency
Annual
VAT: Annual accounting scheme return: Deadline
2m
Of end of return period
VAT: Annual accounting schemes return: Can traders take advantage of additional 7d when filing the VAT return?
No
VAT: Annual accounting schemes: Payments frequency: 2 options
- 9 payments
- 3 payments
VAT: Annual accounting schemes: 9 payments: due when?
End of months 4-12
VAT: Annual accounting schemes: 9 payments: amount of each payment
10% of previous year’s VAT liability
Time apportioned
VAT: Annual accounting schemes: 6 payments: due when?
End of months 4,7 and 10
VAT: Annual accounting schemes: 6 payments: payment amount?
25% of previous year’s VAT liability
VAT: Annual accounting schemes: When balancing payment/repayment made? Not DD
When return filed
VAT: Annual accounting schemes: When balancing payment/repayment made? When DD
3 days after return filed
VAT: Condition to join annual accounting scheme
Trader’s
VAT-exclusive
Taxable
Turnover
(Including zero-rates sales)
(Excluding sales of capital assets)
Must be expected to be
NO MORE THAN
THE TURNOVER THRESHOLD
In the following 12m
VAT: Turnover threshold to join the scheme (TT I think)
1,350,000
VAT: Turnover threshold to leave the scheme (TT I think)
1,600,000
VAT: Joining annual accounting scheme: Other conditions
Traders returns and payments must be up to date
No convictions for VAT offences
Or penalties
In prev 12m
VAT annual accounting scheme: Leaving scheme threshold
Taxable supplies
From prev 12m
Exceed turnover threshold
VAT annual accounting scheme: Advantages
- 1 return. Less administration
- Extra month
(For return and balance g payment) - Regular fixed payments (Budgeting)
VAT annual accounting scheme: Disadvantages
- Payments based entirely on previous year liability
So unattractive to businesses with declining taxable turnover - Not suitable for zero-rated businesses
VAT: Cash accounting scheme: Operation
Based on cash receipts and payments
(Rather than using dates of invoices issued and received)
VAT: Cash accounting scheme: Tax point
Time of receipt or payment
VAT: Cash accounting scheme: Conditions for joining
VAT-exclusive taxable turnover
(Including zero-rated sales but excluding sales of capital assets)
Expected to be
No more than
Turnover threshold
In the following 12m
Turnover threshold to join VAT cash accounting scheme
1,350,000
VAT cash accounting scheme: Threshold to leave the scheme
1,600,000
VAT: Other conditions for joining cash accounting scheme
Same as annual accounting scheme
VAT: Cash accounting scheme: Advantages
- No output VAT selling on credit until received payment
- Automatic bad debt relief
- Can combine with annual scheme
VAT: Cash accounting scheme: Disadvantages
- Input tax not claimed until invoice paid
Delays recovery of input VAT - Not suitable for cash sales
Or zero-rated businesses
(Just delays recovery)
VAT: Flat rate scheme: Operation
Flat rate %
Applied to gross (VAT inclusive)
Total turnover
(Exclusive of zero rated and exempt supplies)
VAT: Flat rate scheme: % varies based on
Type of trade business is involved in
VAT: Flat rate scheme: deduction conditions + amount
(Included in Q)
1%
First year of registration
VAT: Flat rate scheme: Limited cost traders (Very low cost base e.g. IT contractors): %
16.5 %
VAT: Flat rate scheme: How are invoices issued?
As usual
(With VAT charged at applicable rate)
VAT: Flat rate scheme: How are input VAT records kept?
None are kept
Because not separately recovered
VAT: Flat rate scheme: Joining limit
150,000
VAT: Flat rate scheme: Leaving limit
230,000
VAT: Flat rate scheme: Advantages
- Less admin (no input records)
- Possibly less VAT
- Can use with annual scheme
VAT: Flat rate scheme: Disadvantages
- Not suitable for zero rated businesses
(Just delays input recovery) - Not suitable for businesses with high input tax compared to their sector average
