Value Added Tax

Question 1

When was VAT introduced in the UK

Answer 1

VAT was introduced in the UK in April 1973

Question 2

What did VAT replace

Answer 2

VAT replaced Purchase Tax

Question 3

What is VAT governed by

Answer 3

VAT is governed by the Value Added Tax Act 1994 (VATA 1994)

Question 4

Where is VAT on the revenue table for the UK

Answer 4

VAT is the third-largest source of UK tax revenue (after Income Tax and National Insurance)

Question 5

What type of tax is VAT

Answer 5

VAT is an indirect consumption tax

Question 6

Where is VAT levied

Answer 6

VAT is levied at each stage of the supply chain but untimely borne by the final consumer

Question 7

What is output VAT

Answer 7

Output VAT is the VAT charged by the business on sales

Question 8

What is input VAT

Answer 8

Input VAT is the VAT paid by the business on purchases

Question 9

What is Net VAT

Answer 9

Net VAT is the output VAT - Input VAT

Question 10

Who are taxable people

Answer 10

Taxable people are any individual, partnership, company or other entity registered for VAT

Question 11

What are taxable supplies

Answer 11

Taxable supplies are sales of goods/services in return for consideration

Question 12

What is VAT registration compulsory

Answer 12

VAT registration is compulsory when taxable turnover exceeds £85,000

Question 13

What is voluntary registration

Answer 13

Voluntary registration is when a company below the threshold for businesses wanting to reclaim input VAT

Question 14

What is group registration

Answer 14

Group registration is when combined turnover test to prevent fragmentation to avoid registration

Question 15

When is a company deregistered from VAT

Answer 15

If taxable turnover falls below £83,000 or if business ceases taxable supplies

Question 16

What is the standard VAT rate

Answer 16

The standard VAT rate is 20%

Question 17

What goods are subject to standard VAT rates

Answer 17

Most goods/services are subject to standard VAT rates

Question 18

What is the reduced VAT rate

Answer 18

Reduced VAT rate is 5%

Question 19

What are examples of reduced VAT products

Answer 19

Reduced VAT products are: Domestic energy, energy saving materials

Question 20

What are examples of zero VAT

Answer 20

Zero VAT are: Food, children’s clothing, books

Question 21

What are examples of things exempt from VAT

Answer 21

Examples of things exempt from VAT are: Education, insurance, financial services, healthcare

Question 22

Where is exempt VAT defined

Answer 22

Exempt VAT is defined under VATA 1994 Schedule 9

Question 23

How is VAT accounted for

Answer 23

VAT is accounted for using:
- Quarterly VAT Returns
- Alternative schemes for repayment businesses or small traders

Question 24

What must a VAT invoice contain

Answer 24

VAT invoice must contain:
- Seller & buyer details
- VAT number
- VAT amount and rate
- Description of goods/services
- Invoice sate and tax point

Question 25

What is the tax point for goods

Answer 25

Tax point for goods is when delivered/collected

Question 26

What is the tax point for services

Answer 26

Tax point for services is when work is completed

Question 27

Why is knowing the tax point essential

Answer 27

Knowing the tax point is essential for correct VAT period reporting

Question 28

What are the different VAT special schemes

Answer 28

VAT Special Schemes are: - Cash Accounting - Annual Accounting - Flat Rate Scheme - Retail Schemes - Second-hand Goods Scheme - Payments on Account

Question 29

What are the key features of Cash Accounting

Answer 29

key features for cash accounting are: VAT accounted on cash received/paid

Question 30

Who is cash accounting suitable for

Answer 30

Cash accounting is suitable for companies with Turnover < £1.35m

Question 31

What are the key features of annual accounting

Answer 31

Key features of annual accounting are: One VAT return per year, 9 monthly instalments

Question 32

Who is Annual accounting suitable for

Answer 32

Annual accounting is suitable for companies with turnover <£1.35m

Question 33

What are the key features of the Flat Rate Scheme

Answer 33

Key features of the flat rate scheme are: % of gross turnover, no input VAT reclaim

Question 34

Who is Flat Rate Scheme suitable for

Answer 34

Flat Rate Scheme is suitable for companies with turnover < £150k

Question 35

What are the key features of the Retail Schemes

Answer 35

Key features of the Retail Schemes are: Estimate VAT using sector-specific methods

Question 36

Who is the Retail Schemes suitable for

Answer 36

Retail Schemes are suitable for retailers with many small sales

Question 37

What are the key features of the Second-hand Goods Scheme

Answer 37

Key features of the Second-hand Goods Scheme are: VAT only on profit margin, not full sale

Question 38

Who are Second-hand Goods Scheme suitable for

Answer 38

Second-hand Goods Scheme are suitable for: Dealers in used goods

Question 39

What are the key features on Payments on Account

Answer 39

Key features of payments on account are: For large traders (VAT > £2m/year)

Question 40

Who are Payments on Account suitable for

Answer 40

Payments on Account are suitable for large corporations

Question 41

What do VAT special schemes balance

Answer 41

VAT special schemes balance tax compliance burdens with revenue protection

Question 42

What is the Destination principle

Answer 42

Destination principle - VAT applies where goods/services are consumed

Question 43

What is the VAT on exports to the EU

Answer 43

Exports to the EU are Zero-rated

Question 44

What is the VAT charged on imports to the EU

Answer 44

Imports from the EU, VAT is charged at the boarder

Question 45

Where can VAT from Imports from the EU be reclaimed

Answer 45

VAT on imports from the EU can be reclaimed by VAT-registered businesses under postponed VAT accounting)

Question 46

When was VAT reduced to 5%

Answer 46

VAT reduced to 5%: 15 July 2020 - 30 Sept 2021

Question 47

What was the VAT rate from 31 Sept 2021 to 31 March 2022

Answer 47

12.5% Until March 2022

Question 48

When did VAT return to 20%

Answer 48

VAT returned to 20% from April 2022