VAT Flashcards
What types of VAT are outside scope and exempt?
Outside scope- dividends and salaries
Exempt - insurance
What types of VAT are zero rated or reduce rate? What is rate?
Zero rated- food or kids clothes
Reduce rated - domestic utilities at 5% added to sales price
How do you calculate VAT exclusive figure?
Standard- 20/120
Reduced - 5/105
How do you know if someone is required to register for VAT?
Historic and future prospect test
1. Will taxable supply exceeded limit in previous 12 months
2. Will taxable supply exceed limit in the next 30 days
Limit is £85,000
When do you notify HMRC in regards to historic testing? When is it effective?
Within 30 days of end of month and is effective from day of next month
When do you notify HMRC in regards to future prospect testing and when does it become effective?
Notify HMRC by end of 30 days and effective when you become aware
What is excluded from taxable supplies?
VAT, exempt supplies, outside of scope, sale of capital asset
How often do you file a VAT return?
Quarterly
What is the basic tax point and the actual tax point?
BTP- when goods are made available
ATP- if a tax invoice has been issued or payment received before BTP.
If invoice has been issued within 14 days of BTP ATP equals invoice date
How do you treat output VAT on drawings and gift and private fuel? What about trade samples or gifts or service?
- Charged on replacement cost
- Charged on scale rate (co2)
- Not taxable supply
When can a seller reclaim output VAT on bad debts? What is it classed as?
It is classed as input to VAT
If that overdue by six months or written off in sellers books
List four goods where input VAT cannot be recovered
Cars (unless for driving school)
Non-business items, lost receipts, business entertaining (except for staff or foreign customer)
When is the VAT payable by?
One month and seven days after end of quarter
What are substantial traders?
That liability exceeded in 2.5 mil. Must make POA.
In regards to substantial traders what is paid in months two and three of every quarter?
1/24 of annual liability for prior year
What is the annual accounting scheme? What are the two options for POA?
When one VAT return submitted.
Two options for POA
- 9 payments due at end of month 4 to 12 and 10% of last year liability
- Three payments due at month for 710 and 25% of last year liability
What is the cash accounting system? (VAT). What are the conditions to join?
VAT accounted for based on cash receipts and payments, not invoices.
It can be used with annual accounting scheme
Turnover threshold to join is £1.35 million in following 12 months threshold to leave is £1.6 million
How long should records of goods and services supplied be kept for VAT purposes?
Six years
What is the formula for the flat rate VAT scheme? What are the conditions?
VAT due = Total turnover (VAT Inc) x flat rate %
This percentage is reduced by one in first year.
To join turnover limit excluding VAT should be over £150,000
Must leave if total income including VAT exceeds £230,000
When can an error be corrected in VAT?
If small.
Small means less than 10,000 and 1% of taxable turnover exclusive of that.
What can’t input VAT be claimed on?
Client entertaining
cars
non-business items
no receipt
