VAT Flashcards
(14 cards)
What is the VAT registration threshold
The VAT registration threshold is £90,000 in taxable turnover within a rolling 12-month period.
What are the repayment plans available for VAT?
VAT returns and payments are typically made quarterly. However, businesses can choose to submit and pay monthly or annually, depending on their circumstances.
What is the capital goods scheme?
Allows a business to ensure VAT on high value capital assets accurately reflects their use for taxable and exempt purposes over time. It is an important mechanism for businesses with mixed use assets.
What happens to input VAT when you register?
A business can reclaim input VAT incurred on any goods purchased in relation to the business from the last 18 months since incorporation (as this is less than the 4 year limit) provided these goods are still in use. For example VAT incurred on plant and machinery and computer equipment being used by the business can be reclaimed, but VAT incurred on inventory that has since been used by the business cannot.
Only VAT incurred on services used by the business within the last 6 months prior to VAT registration can be reclaimed. Anything before this cannot be reclaimed.
How do you treat VAT pre-registration?
Input VAT cannot be reclaimed, and output VAT is not charged
What is the impact of zero rated and exempt VAT supplies?
- Zero-rated supplies: VAT is charged at 0%, and the business can reclaim input VAT. e.g. Food, Children’s clothing
- Exempt supplies: No VAT is charged, and the business cannot reclaim input VAT. e.g. Healthcare, Financial Services
What is the de-registration threshold for VAT?
The VAT de-registration threshold is £83,000. If a business’s taxable turnover falls below this amount, it may apply to deregister for VAT.
What is the flat rate VAT scheme?
The Flat Rate Scheme simplifies VAT by allowing businesses with a taxable turnover of up to £150,000 to pay a fixed percentage of their turnover as VAT, rather than accounting for VAT on each transaction.
What is the cash accounting VAT scheme?
VAT is accounted for only when payments are made to suppliers, or receipts are received from customers.
Only businesses with VAT taxable turnover of £1.35m or less are eligible.
What is the annual accounting VAT scheme
Only one VAT return is completed annually, but interim payments are made toward the estimated VAT liability.
Only businesses with VAT taxable turnover of £1.35m are eligible.
When are the VAT return deadlines?
One month and 7 days after the end of the VAT period
What happens to output VAT when you register?
Once the company has crossed the VAT threshold then it must start charging output VAT on any sales made from the date of VAT registration.
Alongside this, the company must charge VAT on all unpaid sales invoices issued in the 6 months pre registration.
What is the VAT Reverse Charge?
The VAT Reverse Charge is a mechanism where the customer, rather than the supplier, is responsible for accounting for VAT on a transaction. The supplier does not charge VAT, and the customer records both output and input VAT on their VAT return.
Why does the VAT Reverse Charge exist?
The reverse charge exists to prevent VAT fraud (e.g., missing trader fraud) and ensure VAT is properly accounted for, especially in cross-border transactions or high-risk industries.
It also simplifies cash flow for businesses by eliminating the need for the customer to pay VAT upfront and reclaim it later.
