VAT - further aspects Flashcards
What is meant by accounting for VAT?
Telling HMRC how much VAT is owed
How long is the VAT period normally?
3 months (quarterly)
Who are substantial traders?
Taxable persons with an annual VAT liability above £2.3million
Payment on account of VAT quarterly
Each payment is 1/24 of the total VAT liability for the previous year
What is the annual accounting scheme?
One VAT return submitted every 12 months
due within 2 months of the end of year
Makes 9 equal monthly payments on account of 1/10 of the previous year’s liability or 3 quarterly interim payments
What is the cash accounting scheme?
Accounts for VAT on the basis of cash paid and received, rather than on invoices received and issued.
What are the main advantages of the cash accounting scheme?
Output VAT doesn’t have to be accounted for until payment is received
Automatic bad debt relief since no out put VAT is payable is not received
What is the flat rate scheme?
Flat rate % applied to turnover, set by type of business.
Ranges from 4% to 14.5%
Turnover x FR% x 1.2
What are the conditions of the flat rate scheme?
Taxable supplies doesn’t exceed £150k
What is the main advantage of the flat rate scheme?
Reduces admin as no records of input VAT need to be kept
What records do HMRC require a taxable person to keep?
Order and delivery notes
Purchase invoices, copy of sales invoices and credit notes
Purchase and sales day books
Records of daily takings
Cash book
Bank statements and pay-in slips
Annual accounts
What details must a VAT invoice contain?
Unique identification number
Business name and address
Clear description of the goods/service
Date of invoice and the tax point if different
Total VAT charged
What are the advantages of the annual accounting scheme?
Reduced number of VAT returns
2 months to complete annual return and make balancing payment
When should a business file and pay VAT return?
1 month 7 days after period ends
How does a substantial trader pay VAT?
POA made during months 2 and 3 of each quarter with a balancing payment made 1 month after quarter end
POA = total VAT liability from previous year x 1/24
What is the max invoice value if a trader wants to use a simplified VAT invoice?
£250
