VAT Flashcards by Harry Lockyer

Scope of VAT

Chargeable on
The sale of taxable supplies
By a taxable person

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VAT: Taxable supply

Any supply
Of goods or services
Made in UK

Other than
Exempt supply
Or a supply outside VAT scope

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VAT: Taxable person

A sole trader
Partnership
Limited company
Club
Or association

Making taxable supplies

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VAT: Reduced rate

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Amount trader receives on selling a product when an error means output VAT not being charged on a taxable supply

Considered to be inclusive of VAT

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No. VAT registrations for a sole trader carrying on several business

One

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No. VAT registrations for multiple limited companies

Multiple

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2 years for compulsory VAT registration

Historic

Future prospects

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What are both compulsory VAT registration tests based on?

Turnover

Compared to annual registration limit

(Historic Test also considers deregistration limit)

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VAT annual registration limit

85k

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VAT deregistration limit

83k

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VAT: Historic test: Frequency

End of each month

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VAT: Historic test: what is the test?

Looks back 12m
To see if total taxable supplies exceeded registration limit

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VAT: Historic test: notification

Within 30d
Of end of month exceeded

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VAT: Historic test: effective from

First day after end of month following relevant month

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VAT: Historic test: Does trader need to register if taxable supplies for next 12m expected to be less than deregistration limit?

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VAT: Historic test: Does trader need to register if only makes zero-rates supplies

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VAT: Future prospects test: Frequency

Considered constantly

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VAT: Future prospects test: What is the test

Looks forward
Sees if in the next 30d alone
Taxable supplies will exceed registration limit

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VAT: Future prospects test: Notification

By end of 30d period
Starting on date reader became aware

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VAT: Future prospects test: Effective from

Immediately
(I.e. start of 30d period)

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VAT: Future prospects test: Does trader need to register if only making zero rated supplies?

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VAT: Taxable supplies

All sales

Excluding:
VAT
Exempt supplies
Outside scope supplies
Sale of capital assets

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Responsibilities of VAT registered person

Charge output tax
Quote VAT no. on all sales invoices
File return for allocated ‘tax period’
Maintain appropriate records

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What to do if trader registers late for VAT? So doesn’t charge output VAT on taxable supplies

Pay outstanding VAT to HMRC (Sales treated as VAT inclusive)

When can someone register for VAT voluntarily

Business making Or intending to make Taxable supplies

Voluntary VAT registration: Advantages

Avoids penalties for late registration Can recover input tax (On purchases) Can disguise small size of business

Voluntary VAT registration: Disadvantages

Burden if compliance Must charge output VAT (Makes produce more expensive to consumers who can’t claim back e.g. consumers)

VAT deregistration: Compulsory: when?

Business ceases to make taxable supplies

VAT deregistration: Compulsory: Notify HMRC by when

Within 30d (From becoming aware)

VAT deregistration: Compulsory: Effective from

Date taxable supplies cease

VAT deregistration: Voluntary: When?

Evidence taxable supplies will not exceed deregistration limit in next 12m

VAT deregistration: Voluntary: 12m measured from when

Starting any time

VAT deregistration: Voluntary: Effective from

Date of request Or agreed later date

VAT: Effect of deregistration

Output tax accounted for On the value of fixed assets And inventory Held at the date of deregistration On which a deduction for input tax had been claimed

VAT deregistration exception

Final tax liability waived If less than or equal to 1k

VAT normally accounted for how frequently?

Quarterly

VAT tax point

Date of a supply To indenting quarter in which it falls

VAT: BPT

Basic tax point

BTP: Goods

Date removed from stock Or despatched

BTP: Services

Date performed

BTP: Goods on sale or return

Earlier of Date goods adopted by customer Or 12m after despatch date

VAT: ATP

Actual tax point

ATP process: Step 1

Identify BTP

ATP process: Step 2 after identifying BTP

On or before BTP, has: A tax invoice been issued? A payment been received?

ATP process: Step 2 (invoice or payment made): Yes:

ATP is the earlier date

ATP process: Step 2: No

Step 3: Has the tax invoice been issued Within 14d Of the BTP?

ATP process: Step 3 (Has tax invoice been issued within 14 days of BTP?) Yes

ATP = Invoice date

ATP process: Step 3 (Has tax invoice been issued within 14 days of BTP?) No

ATP = BTP

VAT tax points: Deposits

Creates its own tax point Will be separate tax points for The deposit The balancing payment

VAT: Trader withdraws goods for own use

Output VAT accounted for On full replacement cost of supplies

VAT: Gifts of stock or fixed assets

Treated as taxable supplies At replacement value Unless: Cost of total gifts Made by the same person Don’t exceed £50 (Excluding VAT) In any 12m period

VAT: Are trade samples taxable supplies?

VAT: Are gifts of services taxable supplies?

VAT: Discounts

VAT on discounted price (Because always calculated on price customer actually pays)

VAT: Prompt payment/settlement discounts

2 choices: 1. Supplier charges full VAT Then credit note 2. Supplier details both prices on invoice And notes customer can only recover input VAT on amount actually paid If discount it taken then supplier must adjust their records

VAT: Private fuel for employees (Both business and private purposes) Input VAT

Can recover all input VAT

VAT: Private fuel for employees (Both business and private purposes) Output VAT

Charged at a scale rate Based on CO2 Rating of car (Compensates for VAT reclaimed on fuel used privately) (Multiply scale rate by 1/6 to obtain outfit VAT that will be included on trader’s VAT return)

VAT: Bad debts

Can reclaim output VAT if: Debt is at least 6m overdue And Debt has been written off in seller’s books

VAT: Recovery of pre-registration VAT: Goods

Must be acquired for business purposes And should not be sold or consumed prior to registration (I.e. should still be in stock) Acquired less than 4m before registration

VAT: Recovery of pre-registration VAT: Services

Must be supplied for business purposes Supplied less than 6m before registration

Can input VAT be recovered for cars

No Unless 100% for business purposes E.g. cars for driving school

Can input VAT be recovered for non-business items

Can input VAT be recovered for VAT items for which no VAT receipt is held

Can input VAT be recovered for business entertaining

Can input VAT be recovered for business entertaining: Exceptions

1. Staff entertaining 2. Entertaining foreign customers

VAT Flashcards

(66 cards)