VAT (value added tax) Flashcards
what is VAT?
the tax on buying things
why is there tax on buying things?
the most important way the government gets money
what is the current rate businesses registered with VAT must charge?
20%
who does VAT tax?
the consumer (the final buyer)
what is the threshold of turnover to which a business must register for VAT?
a turnover of £85,000
what would happen if a business does not register for VAT despite reaching the threshold of turnover?
they will face a penalty of up to 15% of the tax
why do some businesses register for VAT before reaching this threshold?
so then they can claim all the goods and services they have paid for like incidental costs and equipment
what happens once a company has registered for VAT?
- a VAT registration
- this must be on all quotations, invoices and credits notes and some business
what is an output tax?
VAT registered companies that charge VAT on all their goods
what is an input tax?
the company will also pay tax on products they buy
what is paid to HMRC?
the difference between output and input tax (the tax they charge - the tax they pay)
when would a company receive a refund from HMRC?
when their input tax (the tax they’re paying) is higher than the output tax
how are the inputs and outputs given to HMRC and how often?
through a VAT return aka VAT 100 and they are sent quarterly
a lower rate of 5% is applied to which items? (list 3)
- domestic fuel
(LPG, liquified petroleum gas is used in homes for cooking and hence is known as domestic fuel. It is stored in cylinders.) - children’s car seats
- smoking cessation products
which goods are set at a 0% rate? (list 5)
- food
- books
- children’s clothes
- public transport
- women’s sanitary products
