3. Inputs Outputs & Special Schemes Flashcards
(44 cards)
Businesses that are ‘partially exempt’
Ie supply some exempt and some taxable supplies…
Cannot reclaim input tax on the purchases that RELATE to the EXEMPT supplies. (It will have to calculate)
Unless …
if the amount of Vat incurred relating to exempt supplies is below the ‘DE MINIMUS’ limit then input VAT can be recovered in FULL
(There are HMRC tests relating to this eg. Under 625 p/m and under 50% of goods supplies are exempt)
Business entertaining
Prohibited (except for overseas customers) under a special legal provision.
Provision of food & drink.
Provision of accommodation.
Tickets theatre sport nightclubs.
Use of facilities such as yachts & aircraft for purpose of entertaining.
Employee entertainment is ok.
Seasonal staff parties.
Staff outings.
.
Cars … rules for reclaiming vat on purchase..
Can reclaim vat on car if…
- Will be used exclusively for biz purpose and not available for private use EVEN for driving to work.
- The biz is a taxi business, driving school or self-drive rental biz.
- The biz is a car dealer and car will be part of inventory that intends to sell within 12 months.
Cars … rules for repairs and maintenance
Can reclaim all vat as long as…
- Biz pays for work
- There is some biz use of vehicle.
Rules on commercial vehicles
Vans lorries tractors etc (and range rovers in some cases!)
Reclaim vat in normal way.
Car and van sale rule…
If biz wasn’t able to reclaim input tax on original purchase price OF A CAR WHICH WAS BOUGHT NEW, it will not have to charge VAT when sold.
If a biz buys or sells second hand cars it may choose to use what scheme.
VAT margin scheme.
(Eligibility definition in VAT (Cars) Order 1992)
Account for VAT on the profit (or margin)
Cannot be used if the biz was charged vat when it originally bought the vehicle.
Reclaiming VAT on road fuel
1) Don’t reclaim any tax.
Useful if mileage is very low and fuel is for both biz & private.
If chosen must apply to ALL vehicles including commercial vehicles.
2) If all fuel only for biz purpose (which doesn’t include driving to work)
Biz can reclaim all.
3) If fuel is split use biz can keep records and reclaim tax on biz use fuel.
4) If fuel is split can reclaim all and pay a separate ‘Fuel Scale Charge’.
The Fuel Scale Charge is
A quarterly charge on the CO2 emissions of vehicles.
This charge has a political agenda.. gov seen as enviro friendly by taxing atmospheric pollution. Tends to go up every year. Gas guzzling 3x low emission vehicle.
There is a calc tool on HMRC for fuel scale chg..
Need:
CO2 emission fig for the vehicle (in the logbook).
Once the charge has been calculated the VAT on this charge must be included in the businesses VAT account.
The VAT exclusive amount must be included box 6.
The VAT amount must be included box 1.
VAT accounting for ADVANCE PAYMENTS / DEPOSITS
If a biz asks for an advance payment or deposit the tax point is the EARLIER of:
- The date a VAT invoice is issued for the advance payment or deposit.
- The date the business receives the advance payment or deposit.
If the customer then pays the remaining balance before delivery another tax point is created which is the EARLIER of
- The date a VAT invoice is issued for the balance.
- The date the business receives payment of the balance.
VAT accounting for INSTALMENTS
Goods remain property of seller until full price paid.
This is known as a “Conditional sale”
Basic tax point is created when goods are handed over.
On that date a business should account for the VAT on the FULL VALUE
Imports and Exports (EU and Non)
Basic principle (applies to imports and exports)…
…Is that VAT is a tax on IMPORTED goods and some services - it is paid where appropriate by the importer and is treated as an input tax
Goods imported from outside EUROPE
VAT normally due at same rate the would apply to a supply of those goods within the UK
It is treated the same way s input tax (but charged by HMRC instead of the supplier) and will normally have to be paid before release of goods by HMRC. VAT registered companies can then reclaim but ordinary ppl can’t.
Goods exported from UK outside EU
Can be zero-rated as long as documentary evidence of export is obtained and retained.
VAT and EU (single market) … terminology?
Since 1993 EU has become area in which movements of goods are no longer called Imports and Exports but instead ‘Acquisitions’ and ‘dispatches’.
How is EU VAT collected (not by HMRC as with Imports)
VAT is collected from the buyer.
If buyer is VAT registered:
Goods are zero-rated and VAT is collected from the buyer at the local rate (Box 2 “VAT due on EU acquisitions”
It is then reclaimed in Box 4 “VAT reclaimed on purchases (including EC acquisitions)”
If buyer is not VAT registered the goods will normally be charged by the supplier at the VAT rate in the suppliers country.
Conditions for zero-rating of EU supplies…
- Buyers (valid) VAT number must be quoted on invoice (incl CC)
- Goods are sent to destination in another EU member state.
- Supplier holds documentary evidence that the goods have been sent.
Tax point for goods supplied to EU?
The EARLIER of:
- The date on the invoice covering the goods.
- The 15th of the month following month of supply.
Tax treatment for goods sent from EU suppliers to UK
Tax point same rules:
The earlier of the invoice date or the 15th of the month following the supply.
What are free zones and warehousing
Storage facilities for goods, normally near ports and airports;
They can be used for storage of goods received from overseas.
No VAT is due on these goods until released to the UK buyer.
Place of supply of goods and services.
It is important to know this why?
It’s the place where VAT will be charged and paid.
PLACE OF SUPPLY for goods is straightforward but for SERVICES it’s complicated… what is the rule called and explain…
The ‘general rule’
Business customer:
The place where the customer belongs.
Non-business customer:
The place where the supplier belongs
If the supplier is in the UK and place of supply is to another EU country the supplier doesn’t have to charge UK VAT but may have to register and account for VAT in the country of supply.
If the place of supply is not in the EU the supplier doesn’t have to charge UK VAT but should include the sale in BOX 6. “Total value of sales and all other outputs excluding VAT”
What are the Special schemes
Annual accounting scheme
Flat rate scheme
Cash accounting scheme