VAT - Further Aspects

Question 1

Substantial traders…

Answer 1

• traders with VAT liability >£2.3m must pay their VAT via payments on account
• payments required at the end of months 2 and 3 of every quarter with a balancing tax payment at the end of month 4
• payments on account = 1/24th of annual liability of previous year

Question 2

Cash accounting scheme…

Answer 2

VAT accounted for on a cash basis rather than using the ‘tax point’

Rest in back of tax tables

Question 3

Annual accounting scheme…

Answer 3

• one VAT return submitted each year within 2 months of period end
• payments on account must be made
• VAT payments still made regularly under either of two options:

1. 9 payments due at end of months 4-12 and then balancing payment along with submission of return
2. 3 payments due at end of months 4, 7 and 10 of VAT year and then balancing payment along with submission of return

Rest in tables

Question 4

Flat rate scheme…

Answer 4

• net VAT due = flat rate % (given) x gross (VAT inclusive) turnover

Rest in tables

Question 5

What is the maximum invoice value if a trader wishes to issue a simplified VAT invoice?

Answer 5

£250

Question 6

For the 9 payments method in the annual accounting scheme, how much of the previous year’s liability is each payment?

Answer 6

1/10th

Question 7

Can HMRC grant exemption from registration to zero rated traders that have negligible amounts of input VAT?

Answer 7

Yes

Question 8

Can businesses be part of more than one accounting scheme?

Answer 8

Yes as long as they meet the criteria. Therefore businesses can only really be part of both the cash and annual accounting schemes and flat rate

Question 9

Advantages of cash accounting scheme?

Answer 9

• automatic bad debt relief is received

- advantageous for businesses offering extended credit to customers