VAT

Question 1

Put simply, how is VAT return calculated?

Answer 1

Output VAT - Input VAT

Question 2

What is output VAT charged on?

Answer 2

Sales.

Question 3

What is input VAT charged on?

Answer 3

Purchases & expenses.

Question 4

What can you not reclaim VAT on?

Answer 4

Client entertainment & cars with private use.

Question 5

What 2 conditions must be met to claim VAT on a bad debt?

Answer 5

• Must be 6 months or older.
• Must have been written off.

Question 6

Where there is a gift of a good, what type of VAT is there and what is accounted on?

Answer 6

• Output VAT
• VAT on replacement cost

Question 7

Is scale charge on fuel an input/output VAT?

Answer 7

Output VAT.

Question 8

Anything related to capital should be…?

Answer 8

Removed, we only look at day-to-day.

Question 9

If a company is a VAT group, is there VAT charged?

Answer 9

No.

Question 10

If a commercial property is less than three years old, is it considered a standard-rated supply?

Answer 10

Yes.

Question 11

When is VAT recoverable on commercial property?

Answer 11

• If the purchaser is VAT-registered.
• If the purchaser uses the commercial property to trade/make taxable supplies.
• Has a VAT invoice for the purchase.
• If they intend to rent out the property then input VAT only is recoverable if they opt to tax the warehouse.

Question 12

Do exempt supplies charge VAT to customers?

Answer 12

No.

Question 13

If a commercial building is over three years old, it is…?

Answer 13

Exempt.

Question 14

What is the annual adjustment formula for capital goods scheme?

Answer 14

Input VAT/Adjustment period (5/10 years) x (taxable use at end of year - taxable use at start of period).

Question 15

Is the annual adjustment a one-off adjustment in the 5/10 year period?

Answer 15

No, annual adjustment applies every year of the 5/10 year period if taxable use is different from start.

Question 16

What is the annual adjustment on sale if sold within the 5/10 year period?

Answer 16

Input VAT/Adjustment Period x (Tax position on sale (100% or 0%) - taxable use at start) x remaining years.

Question 17

Is plant & machinery always taxable?

Answer 17

Yes.

Question 18

Do we always work in whole years for adjustment period in capital goods scheme?

Answer 18

Yes, we assume that anything that occurs during the tax year happened at year-end.

Question 19

What is the adjustment period for land & buildings and computer equipment?

Answer 19

• Land & buildings: 10 years
• Computer equipment: 5 years.

Question 20

What value must land & buildings and computer must be over for the capital goods scheme to apply?

Answer 20

• Land & buildings: >=£250,000
• Computer equipment: >=£50,000

Question 21

What are the two criteria for the limited cost business flat-rate percentage (16.5%) to apply?

Answer 21

• Relevant goods less than 2% of VAT-inclusive turnover.
• Relevant goods less than £250 per quarter.

Question 22

What are relevant goods?

Answer 22

Goods exclusively used in the trade of the business.

Question 23

Exports from a UK supplier are…?

Answer 23

Zero-rated - zero output VAT.

Question 24

Imports are output VAT because…?

Answer 24

The customer accounts for VAT.

Question 25

If the imports are used for the business then...?

Answer 25

- We would also include this in the input VAT. - Therefore there is both output & input VAT (essentially cancelling each other out).

Question 26

Why are exported services charged at standard-rate anyways?

Answer 26

Because services aren't trusted to be paid for.

Question 27

If a company does not include its VAT registration number at customs declaration - what happens?

Answer 27

Postponed VAT accounting is not available - they would have to pay VAT at point of entry.

Question 28

If a business meets either Test 1 or Test 2, it can...?

Answer 28

Treat itself as de minimis and provisionally recover all input VAT.

Question 29

What is Test 1?

Answer 29

- Total input tax =< £625 per month on average, and - Exempt supplies (excluding VAT and supply of capital items) =< 50% of all supplies

Question 30

What is Test 2?

Answer 30

- Total input tax less input tax directly attributable to taxable supplies =< £625 per month on average, and - Exempt supplies (excluding VAT and supply of capital items) =< 50% of all supplies.

Question 31

What is the de minimis test for partially exempt traders that do not meet Test 1 & Test 2?

Answer 31

- input tax relating to exempt supplies ≤ £625 per month on average, and - input tax relating to exempt supplies ≤ 50% of all input tax.

Question 32

Can you reclaim VAT on wages?

Answer 32

No.

Question 33

Are sales on equipment included in VAT?

Answer 33

No, they're capital items.

Question 34

Are intra-group sales in the scope of VAT?

Answer 34

No - they are not included in VAT.

Question 35

Are computers deemed standard-rated regardless of years of life?

Answer 35

Yes.

Question 36

How many months prior to VAT registration can you claim input VAT on services?

Answer 36

6 months prior to registration.

Question 37

How many months prior to VAT registration can you claim input VAT on goods purchased?

Answer 37

- 4 years prior to registration. - Provided they were supplied for business purposes, and - are still on hand at date of registration.