5. VAT

Question 1

Compulsory registration
- threshold
- type of supplies

Answer 1

1. £85,000
2. Taxable supplies = zero rated, reduced and standard rated

Question 2

Two types of test we can use for compulsory registration

Answer 2

• Future tests
• Historic test

Question 3

Historic test
1. Period
2. Notify
3. Registered from

Answer 3

1. Look back 12 months
   - on last day of each month
2. Within 30 days of the end of the month the thr exceeded
3. 1st day of the second month after taxable supply exceeded thr
   Or
   An agreed earlier date

Question 4

Future test
1. Period
2. Notify
3. Registered from

Answer 4

1. Look forward everyday At next 30 days taxable supplies in isolation
2. By end of 30 days period in which threshold is expected to be exceeded
3. Start of 30 day period

Question 5

Advantages of registration

Answer 5

• recoverable input VAT
• Avoids penalties for late registration
• perception of business
• if zero rates supplies = VAT repayable

Question 6

Disadvantages

Answer 6

• administration
• must charge VAT
  = OK if customers are VAT registers
  = Less competitive if customers are public / non registered business

Question 7

Pre registration input VAT for goods, recoverable if :

Answer 7

• acquired in 4 years pre registration
• still held at registration

Question 8

Pre registration input VAT for services , recoverable if :

Answer 8

Acquired in 6 months lee registration

Question 9

When is VAT deregistration
1. Compulsory
2. Notify
3. Deregistered from

Answer 9

1. Cease to make taxable supplies
2. Notify within 30 days of ceasing supply
3. Deregistered from date of cessation

Question 10

When is Deregistration
1. Voluntary
2. Notify
3. Deregistered from

Answer 10

1. If expected taxable supplies in the next 12 months is less than £83k
2. Notify any time
3. Deregistered from
   - date of request, or
   - an agreed later date

Question 11

What’s the consequences of deregistration

Answer 11

• VAT on deemed supply of all stocks and business assets in hand at date of deregistration
• no charge if less that £1k.

Question 12

Whats the VAT implication on transfer of business as a going concern ( TOGC )

Answer 12

Not a taxable supply

Question 13

What are the conditions of transfer of business as a going concern ( TOGC ) not to be a taxable supply

Answer 13

• sold as a going concern
• no significant break in trading
• same type of trade being carried on
• new owner is, or will become, VAT registered

Question 14

Whats the VAT consequences on transfer of business as a going concern ( TOGC )

Answer 14

• no VAT charged on actual TOGC
• person transferring = must Deregister OR make joint election for the transferee to take over VAT registration
• if joint election made = transferee inherits VAT liabilities of transferor

Question 15

What type of land and buildings are zero rated VAT

Answer 15

Buildings for residential and charitable use
- sales and leases

Question 16

What type of land and buildings are standard - rated VAT

Answer 16

1. New commercial construction
2. Sale of freehold commercial buildings less than 3 years old

Question 17

What type of land and buildings are VAT exempt

Answer 17

Everything else
- but can opt to tax
( I.e waive the expemption)
Sale of old commercial building older than 3 years

Question 18

What are the conditions for opting to tax exempt VAT land and buildings

Answer 18

• elections filed within 30 days of signing
• cooling off period = 6 months
• irrevocable thereafter for 20 years
• separate election for each property

Question 19

What are the impacts of opting to tax exempt VAT land and buildings

Answer 19

• taxable at standard rate
• input VAT can be recovered
• future sale / rent of building = taxable at standard rate
• new owner not bound by election= but can elect to opt to tax in the future

Question 20

What does capital hood scheme apply to

Answer 20

• partially exempt traders, and
• after purchase of certain items = the % of exempt and % taxable proportions changes

Question 21

Calc : What’s the capital good scheme annual adjustment

Answer 21

Total input VAT
X ( years remaining of adjustment period / 10 or 5 years)
X ( now % - original % )

Question 22

What type of items in scheme for capital good scheme

Answer 22

1. Land and buildings
2. Computers

Question 23

capital good schemes for land and buildings, what’s the:
1. Value
2. Adjustment period

Answer 23

1. Over £250,000
2. 10 years
   - 5 years if lease is less than 10 years

Question 24

capital good schemes for computers , what’s the:
1. Value
2. Adjustment period

Answer 24

1. Over 50k
2. 5 years

Question 25

For capital good scheme what’s the remaining adjustment period % if disposable is of a : 1. Taxable supply 2. Exempt supply

Answer 25

1. Taxable supply = 100% taxable use 2. Exempt supply = 0% taxable use

Question 26

What’s the benefit of passing the de minimis test

Answer 26

All input VAT for partial taxable businesses = recoverable

Question 27

De minimis test : What’s test 1

Answer 27

1. Total input tax is less than £625 per month on avg, AND 2. Value of exempt supplies is less than 50% of total supplies

Question 28

De minimis test : What’s test 2

Answer 28

1. Total input tax less input tax directly attributable to taxable supplies = less than £625 per month on avg, AND 2. Value of exempt supplies is less than 50% of value of total supplies

Question 29

De minimis test : What’s test 3

Answer 29

Total irrecoverable input VAT is: - less than £625 per month on avg - less than 50% of total input VAT

Question 30

What’s the VAT on goods exported overseas

Answer 30

Zero- rated supplies.

Question 31

How do you deal with VAT on goods imported from overseas

Answer 31

= tax neutral = postponed accounting system - output VAT at 20% accounted by importer - input VAT suffered can be reclaimed in same return

Question 32

If UK business receives services from overseas business , what’s the: 1. Place of supply 2. VAT implication

Answer 32

1. UK 2. Reverse charge procedure - output vat 20% accounted for - reclaim as input VAT

Question 33

If UK business supplies services to overseas non - business customer , what’s the: 1. Place of supply 2. VAT implication

Answer 33

1. UK 2. Output VAT charges at 20%

Question 34

If UK business supplies services to overseas business customer (B2B) , what’s the: 1. Place of supply 2. VAT implication

Answer 34

1. Overseas 2. Outside scope of VAT

Question 35

Where is the VAT charged when supplying services

Answer 35

Charges in place of supply

Question 36

Where is the VAT charged if the place of supply is 1. Business to business 2. Business to non-business

Answer 36

1. Where the customer is established 2. Where the supplier is established