VAT Flashcards
If the figiures goven in a question are VAT exclsuive, do you need to apply a VAT fraction to calculate the VAT?
No, just apply 20% (or 5% if reduced rate)
What items are blocked for reclaiming VAT?
- Cars with any private use
- UK client entertaining (can recover o/s client entertaining)
What conditions need to be met in order to recover input VAT on bad debts?
- Written off in books
- > 6m overdue
Claimed as relief is the amount of VAT origianlly included on sale
When are VAT returns due?
When is VAT repayable / payable?
VAT returns have to have been submitted and paid 1 month and 7 days after the end of the quater
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What is the difference between a single and a multiple supply of goods for VAT purposes?
VAT treatment differs depending on whether bundles of goods that are sold together but at different prices are a single or multiple supply
Multiple supplies: VAT charges at appropriate rate for each item
Single supply: VAT treatment of ancilliary product follows the treatment of the primary product
* Different to clear intention to buy multiple products
* Different components are not avaliable individually
Identify whether the following bundles are a single supply of goods or multiple supply;
- Provision of air travel with an in flight meal service
- Provision of a car with a delivery charge
- Provision of a cruise liner with optional on board meals
How would the VAT be treated?
Single Supply
* Provision of air travel with an in flight meal service
VAT would follow treatment of air travel
Not possible to get meals without flight
- Provision of a car with a delivery charge
VAT would follow treatment of Car - blocked
Multiple Supply
* Provision of a cruise liner with optional on board meals
VAT charged for each item individually
Fact that meals are optional is key
Makes second product severable
What makes companies eligible for a VAT group?
What is the effect of a VAT group?
- > 50% ownership
- Fixed establisment in the UK
VAT groups are treated as one entity for VAT purposes
One member submits one return on behalf of the whole group
What are some advantages and disadvantages of being in a VAT group?
Advantages:
* Can choose which companies are included in group (e.g. Zero rated firm’s inclusion would be disadvantageous as would reduce cashflow benefit)
* Reduced admin costs - only one return to submit
* No VAT charged on intra group supplies
Disadvantages:
* Joint and several liability of VAT for the group as a whole
* Admin difficulties of collecting information
In what situations can partially exempt traders recover their exempt input tax?
Simplified test
If they meet one of the following tests;
Test 1
* Total input VAT <£625pm AND
* Exempt supplies <50% total supplies for period
Test 2
* Total input VAT less input tax directly attribnutable to taxable supplies <£625pm AND
* Exempt supplies <50% of total supplies
These are the deminimis rules and are in tax tables
If both of these are failed, go onto the standard partial exemption test
If the simplified tests for partial exemption for VAT are failed, what is the standard partial exemption test that is applied?
Need to attribute the non attributable input VAT between taxable and exempt supplies
Taxable supplies / total supplies = %
Apply that % to unattributed input VAT, this is added to VAT on taxable supplies which is fully recoverable
The rest is added to VAT on exempt supplues and is irrecoverable unless it is de minimis
< £625pm AND
< 50% of total VAT for period
What are the annual adjustments made for VAT at the end of each year?
A check to see whether correct VAT has been paid
Amount recoverable for the year is compaerd to the quaterly amounts recovered
What are the default VAT positions for residential and commercial buildings?
What is the Option to Tax and when can it be applied?
Sale/Construction of new residential buildings - 0%
Sale/Construction of <3Y old commercial buildings - 20%
Any other sale or lease - Exempt
The option to tax is avaliable for commercial properties & means sale is VATable.
* All future sales leases on that property are VATable
* This means seller can reclaim input VAT
* 6 month cooling off period where decision can be reversed
Is the option to tax avaliable on residential property?
No, only commercial
What is the capital goods scheme formula for adjustments to use?
When is this applied?
(Total input VAT / year interval) * (Taxable % use now less original taxable usage)
Applied when there is a change in taxable useage and on sale
What is the flat rate scheme?
Applies % to VAT inclusive turnover
% depends on business
Input tax is still suffered in normal way
All information is in tax tables
