VAT practice

Question 1

How to tackle questions on flat rate (5)

Answer 1

*Separate input and output
*Calculate VAT and VAT inclusive figures
*Assess if limited cost business through limits i.e less than 250 or less than total of formula below

*Use this formula: ‘sales total x 1.2 x 2%’

If limited, do sales figure (excl) x 1.2 x 16.5%
If not, sales figure (excl) x 1.2 x flat rate

*Output VAT - Input VAT - Flat rate (either given or 16.5%)

Question 2

Give rules for imports and exports in regards to VAT (goods and services)

Answer 2

Export goods- zero rated
Import goods- postponed accounting (add standard rate to both input and output)

Supply of service:
Exporting service- if non business, apply UK VAT. If business no UK VAT (outside scope)
Importing service- if non business, no UK VAT. If business apply to both input and output (reverse charge for output)

Question 3

Give time limit for recovering input VAT before starting trade for goods and services

Answer 3

For services- 6 months prior
For goods- 4 years if still at hand and only for business purposes

Question 4

What is the requirement to recover input VAT

Answer 4

VAT recoverable if: purchases VAT registered, uses warehouse for taxable supplies and has VAT invoice for purchase