VAT

Question 1

Which items cannot be reclaimed for input VAT ?
(4)

Answer 1

Client entertaining (unless overseas clients)
Cars
Non-business items
Items where no receipt is held

Question 2

Can you register if you make only exempt supplies?

Answer 2

No

Question 3

What is a BTP?

Answer 3

The date goods have left inventory
The date services have been completed

Question 4

If no tax invoice has been issued or no payment has been received, what is the Tax Point?

Answer 4

Has invoice been issued within 14 days after BTP?
Yes > ATP is invoice date
No > BTP

Question 5

Under the historic turnover test, when should HMRC be notified of registration and when should VAT be charged from?

Answer 5

Notification: Within 30 days
Effective charging: from first day after end of month in which limit exceeded

Question 6

Under the future turnover test, when should HMRC be notified of registration and when should VAT be charged from?

Answer 6

Notification: By end of the 30 day period
Effective: Immediately

Question 7

When should a trader notify HMRC if they cease to trade?

Compulsory VAT deregistration

Answer 7

Within 30 days, from date of cessation

Question 8

What items is output VAT charged on? (6)

Answer 8

1. Standard rate
2. Reduced rate
3. Discounted sales
4. Goods taken for own use
5. Gift of goods
6. Private fuel for employees

Question 9

How should you charge output VAT on discounted sales?

Answer 9

Charge full amount of VAT on undiscounted price,
Issue credit note if prompt payment discount is taken

Question 10

How should you charge output VAT on goods taken for own use?

Answer 10

VAT is charged on full replacement cost of supplies

Question 11

How should you charge output VAT on Gifts?

Answer 11

VAT charged for gift of stock / fixed asset at replacement value
Gift of supplies are NOT taxable

Question 12

How should you charge output VAT on private fuel for employees?

Answer 12

VAT is charged at a scale rate (given)

Question 13

Can input VAT on Bad Debts be recovered?

Answer 13

Yes

Question 14

How should traders with a VAT liability > £2.3m pa pay their VAT?

Substantial traders

Answer 14

POA [of each quarter]
1st POA: end of month 2
2nd POA: end of month 3
Balancing: end of month 4

Question 15

How is the VAT liability POA calculated?

Answer 15

POA = 1/24 of annual liability in previous year

Question 16

What is the ‘Cash Accounting Scheme’ ?

Answer 16

VAT is accounted on cash basis instead of a tax point basis.

Question 17

What are the limits under the Cash Accounting Scheme?

Answer 17

1. Taxable supplies (zero / reduced) < £1.35m in the following (next) year
2. Taxable supplies > £1.6m in the previous 12 months, trader must leave the scheme

Question 18

What is the ‘Annual Accounting Scheme’ ?

Answer 18

1 VAT return submitted each year within 2 months of PE

Question 19

What are the options of VAT payments under the Annual Accounting Scheme?

Answer 19

1. 9 payments: months 4 - 12, balancing payment with submission of return.
2. 3 payments: months 4, 7, 10 of the VAT year, balancing payment with submission of return.

Question 20

Look out for … to identify payment dates:

Annual accounting scheme

Answer 20

1. monthly or quarterly payments?
2. VAT YE

Question 21

What is the ‘Flat Rate Scheme’ ?

Answer 21

Net VAT due = flat rate % x Gross turnover (VAT inclusive)
No separate input VAT recovery

Question 22

What is the criteria to claim input VAT on items before registration?

Answer 22

1. The items are still in inventory / still in use
2. Purchased within 6 years

Question 23

When are the VAT returns and payments due?

Answer 23

1 month and 7 days after end of quarter

Question 24

If there is an error and output VAT has not been charged, who is liable to pay and on what price is VAT calculated?

Answer 24

1. Trader is responsible to pay
2. Selling price (incl VAT)

Question 25

Are these items taxable? 1. Gift of services 2. Gift of goods 3. Personal use of goods owned by business owner 4. Services supplied to business owner

Answer 25

1. Not taxable 2. Taxable 3. Taxable 4. Taxable

Question 26

A registered VAT company buys a car which includes ' vehicle excise duty' (incl VAT). What is the capital allowance for the acquisition cost?

Answer 26

capital allowance = Vehicle cost - excise duties

Question 27

If a sole trader has 2 businesses, both has taxable supplies but only 1 exceeds the threshold. Are both businesses relevant in registering for VAT?

Answer 27

Yes, the sole trader is the taxable person and would have 1 registration for both businesses.

Question 28

Are zero-rated supplies eligible for output VAT?

Answer 28

Yes, they are just charged at 0%

Question 29

What happens to your deemed supply of trade stock and capital items once you reach the de-registration limit?

Answer 29

On deregistration, there is deemed supplies previously recovered. Output VAT is payable on this supply > £1,000

Question 30

What are the restrictions on, for example a computer provided to an employee for 10% personal use?

Answer 30

There is no personal use restrictions as it is a valid expense of the business

Question 31

What is the cost to the company of a car for capital allowance purposes?

Answer 31

Input VAT is not recoverable on cars and accessories unless the car is used for 100% business

Question 32

I sell clothes, I gave a coat that I brought for £120 to Alex. The selling price of this coat is £200 (incl VAT). What is the value of the coat for VAT purposes?

Answer 32

Cost x 100/120

Question 33

I dispatch goods sold on 20 Feb, on this day I receive 10% deposit (incl VAT). Invoice for full amount issued on the 1 Mar. The balancing payment was received on the 10th Apr. How much VAT must be accounted for, for: 1. Quarter to 29 Feb 2. Quarter to 31 May

Answer 33

1. Tax point 1: 20th Feb = deposit x 1/6 2. Tax point 2: 1st Mar = balancing payment x 1/6

Question 34

What happens if there are errors on a VAT return? Taxpayer

Answer 34

A taxpayer can adjust on the next VAT return if below limit of: Greater of £10,000 or 1% of turnover (max £50,000)

Question 35

What is the period for 'Repayment of interest on overpaid tax'

Answer 35

From later of actual date paid or due date to day before repayment

Question 36

What is the time limit for keeping VAT records?

Answer 36

6 years

Question 37

What are the responsibilities of a newly registered trader? (4)

Answer 37

1. Charge output tax on taxable supplies 2. Quote VAT reg number on all sales invoices 3. File a return every quarter 4. Maintain appropriate VAT records

Question 38

Does a gift of inventory or fixed asset that replacement's cost less than £50 to a single person qualify for VAT?

Answer 38

NO