VAT & the contract Flashcards
How may property transactions be taxed?
They may be:
*exempt
*zero-rated
*standard-rated
What is the tax treatment of commercial property over 3 years old?
It is exempt unless the owner exercised the option to tax in which case it is standard rated.
What is the tax treatment of new commercial property?
Standard-rated
What is a taxable person?
A taxable person is a VAT registered business.
Any business with a VAT taxable turnover of more than £85,000 each year must register for VAT with HMRC.
Businesses with a turnover of less than £85,000 each year may voluntarily register for VAT with HMRC.
What is the advantage of registering for VAT?
Businesses will be able to offset the input tax it has paid to suppliers against the output tax it charges its customers.
When must a VAT registered business pay VAT collected to HMRC?
Every 3 months.
What are exempt supplies?
Residential property, except for newly constructed property.
Commercial property over 3 years old and the owner has not opted to tax.
What is standard-rated supplies (20%)
Newly constructed commercial property (less than 3 years old)
older commercial property is standard rated if the seller has opted to tax.
What are zero-rated supplies?
Newly constructed residential property.
The buyer does not pay VAT but because the output is taxable, the seller can recover its input tax from HMRC.
What happens if a seller opts to tax property that is over 3 years old?
a subsequent sale of that property is standard-rated. Any tenants of the property would also have to pay VAT on their rent.
What is Condition 2 in the SCPC?
Provides a default that the property is standard-rated.
What is Tickbox A1?
Brings in conditions that override condition 2, and are relevant for properties that are exempt from VAT.
What is Tickbox A2?
Investment property used for collecting rents from occupational tenants may qualify as a TOGC which is exempt from VAT.
What is a Transfer of a Going Concern?
A transaction where the seller uses the property for the business of letting to produce rental income, the buyer will do the same, and meets certain other requirements. A transaction that qualifies as TOGC is not a taxable supply for VAT.
