CTA VAT 26 - 31 Flashcards
(14 cards)
When is a VAT group registration effective from?
The day HMRC receive it
Supplies to or from outside a VAT group are treated as made by ?
The representative member
Advantages of group registration?
- Simplified accounting
- Centralises group affairs and reduces compliance burden (one return)
- Supplies between group members disregarded
- Exempt companies cannot usually register for VAT but if they are in a group they can
Disadvantages of group registration
- If an exempt member it makes the group partially exempt (restricting input tax recovery)
- Hard to obtain the info to do one group return
- Jointly and severally liable
- VAT thresholds apply to whole group (cash or annual accounting)
5.If late in paying, larger penalty`
How does flat rate scheme work?
The relevant percentage is applies to TAX INCLUSIVE TURNOVER to arrive at the amount of VAT due.
Input tax not generally deductible under FRS.
The two exceptions are:
- Purchases of capital asset with VAT-inclusive value of over £2,000
2.Pre-registration input tax
A business is a limited cost trader where VAT inclusive expenditure on relevant goods is either:
- Less than 2% of flat rate turnover for prescribed accounting period or
- Greater than 2% of flat rate turnover but LESS than £1,000 PER ANNUM
*ie £250 per quarter
Why are retail schemes needed ?
What is the starting point for the schemes?
To remove the need for retailers to account for VAT on each individual transaction
Gross daily takings
What is the formula for calculating output tax under Apportionment scheme 1?
Apportionment scheme 1 = quarterly calculation and an annual adjustment is made after
SR sales =
Gross daily takings (inc VAT) x Cost of SR goods purchased (inc VAT) / Cost of all goods purchased (inc VAT)
Output tax = 1/6 x SR sales
Apportionment scheme 2 - no annual adjustment needed.
Formula is:
SR sales (inc VAT) =
Gross daily takings (inc VAT) x ESP of SR goods received in last 12 months (inc VAT) / ESP of all goods received in last 12 months (inc VAT)
Output tax = 1/6 x SR sales
Direct calculation scheme 1 is
How is output tax calculated?
a quarterly calculation to arrive at output tax. No annual adjustment made.
Gross daily takings (inc VAT) =
ESP of ZR purchases x 1/6 (where ZR minority)
ESP of SR purchases x 1/6 (where SR minority)
Second hand goods margin scheme allows traders to ….
treat their margin (ie profit made) as the VAT inclusive amount
Costs in repair or improve are ignored for profit margin. Instead, input tax incurred on the costs can be recovered in the normal way
True or false: any goods on which VAT was charged by the seller under 2nd hand goods scheme cannot be included within the margin scheme?
True
What is global accounting benefit
Allows output tax to be calculated on the overall margin for the accounting period.
*Exclusions include items costing over £500 and cars
**much more practical
