Value Added Tax Flashcards
What is VAT charged on?
Any supply of goods or services made in the UK (unless the supply is exempt) if the supply is made by a taxable person whilst carrying on business.
What do VAT exempt supplies include?
land, insurance, financial services, education, health services or postal services.
What are outside of scope of VAT?
Sale of shares of a company and the sale of a business as a going concern.
What is standard VAT rate?
20%
What are technically subject to VAT but the tax rate is 0%?
Supply of food, books and newspapers, water and sewer services and residential construction
When does a reduced VAT rate of 5% apply?
Domestic fuel, installation of energy saving materials and child car seats.
What are the registration requirements?
A business must register for VAT if its turnover exceeds the VAT threshold (currently £85,000) within any 12-month period (historic test) or if looking forward expects to be exceeded in the following 30 days alone (future test).
What should do if historic test met for registration requirements?
Must register within 30 days and must charge VAT from the start of the following month.
What should do if future test met for registration requirements?
Must inform HMRC before the 30 day period ends and must charge VAT from date business was aware that its taxable supplies were going to exceed the registration threshold.
Why would business voluntarily register for VAT?
Enables it to recover VAT it paid on its own purchases (input tax).
When may a business deregister for VAT?
If the taxable turnover falls below £83,000 for a 12 month period.
When must a business deregister for VAT?
Within 30 days of time it ceases trading
What must a VAT invoice contain?
The supplier’s VAT number, the tax point, the value of the supply and the rate of tax charged.
When must VAT returns be made?
Business must file an electronic VAT return each quarter and pay VAT due to HMRC
What is the calculation for VAT sent to HMRC?
The business charge its customers on all supplies of goods and services (output tax) less any VAT the business paid on goods and services related to the goods or services it supplied (input tax).
