Indirect Taxes

Question 1

What are the conditions for VAT Groups?

Answer 1

• Each company has a fixed establishment in the UK
• One company controls each other company >50%

Question 2

Why would some individual entities choose not to join a VAT Group?

Answer 2

Entities making zero-rated supplies will choose to submit monthly VAT returns and receive regular cash repayments from HMRC rather than lose the cashflow advantage by netting off the repayment against other group liabilities.

Question 3

Benefits of VAT Groups

Answer 3

• No VAT charged on intra-group supplies
• Only one VAT return required.
• Small exempt entities may be able to recover input VAT under de minimis partial exemption rules.

Question 4

Disadvantages of VAT Groups

Answer 4

• All entities jointly and severally liable for group VAT liability.
• Admin difficulties with collecting all entity info.

Question 5

What are the ‘de minimis’ rules?

Answer 5

Test 1:
- Total input tax ≤ £625 per month average.
- Exempt supplies ≤ 50% of all supplies (exclude VAT).

Test 2:
- Total input tax less input tax from taxable supplies ≤ £625 per month average.
- Exempt supplies ≤ 50% of all supplies (exclude VAT).

Question 6

Partial Exemption Non-attributable input VAT calc.

Answer 6

(Total taxable supplies / total supplies)*Non-attributable input VAT.

Question 7

Partial Exemption - Things to look out for

Answer 7

• Apportionment between taxable and exempt is rounded up to %.
• VAT figures usually given per quarter therefore exempt supplies should be /3 not 12 for de minimis limits.
• Annual adjustments to input VAT recovered using partial exemption.

Question 8

What residential property transactions are zero-rated?

Answer 8

• Construction or sale of new residential building
• Lease exceeding 21 years on new residential property
• Sale of newly converted residential property from non-residential if done by the converter.

Question 9

What residential property transactions are standard-rated?

Answer 9

Work on existing residential building

Question 10

What residential property transactions are reduced-rated?

Answer 10

• Renovation of dwellings empty for 2 years+
• Conversion of residential into different number of dwellings

Question 11

What residential property transactions are exempt?

Answer 11

• Sale of old residential building
• Most leases of residential buildings

Question 12

What commercial property transactions are standard-rated?

Answer 12

• Construction or sale of new commercial building
• Work on existing commercial building

Question 13

What commercial property transactions are exempt?

Answer 13

• Sale of old commercial buildings
• Lease of any commercial building

Question 14

Option To Tax

Answer 14

• Business can change their mind within 6 months of OTT providing they have not put it into practice.
• An OTT will automatically be revoked once the person who opted to tax has held no interest in that property for 6 years.
• Otherwise the OTT may be revoked after 20 years with the consent of HMRC.

Question 15

What are the registration and de-registration limits for the flat rate scheme?

Answer 15

• Register at £150k turnover (excl. VAT + exempt)
• De-register at £230k turnover (incl. VAT + exempt)

Question 16

Capital goods scheme formula

Answer 16

(Total input VAT/10 or 5 yrs) * (taxable % use now - original taxable % use)

Question 17

When is SDLT not chargeable on lease premium?

Answer 17

• Lease term of a dwelling for less than 7 years.
• Lease of a dwelling for between 7-21 yrs where avg. annual rent >£1000

Question 18

Corporation Tax - What is SSE?

Answer 18

Substantial Shareholding Exemption - no chargeable gain arises on disposal out of a substantial shareholding in a trading company.

• Holding of 10%+ for continuous period of 12 months in 6yr prior to disposal.