VAT & corporation Tax

Question 1

What is VAT

Answer 1

Value added tax

Question 2

What are the rates of VAT

Answer 2

Zero and standard 20%

Question 3

How much is the reduced rate of VAT

Answer 3

5%

Question 4

What goods are reduced rate of VAT payable on

Answer 4

domestic fuel, installation of energy saving materials and certain property renovations

Question 5

What is output VAT

Answer 5

VAT payable on goods and services sold

Question 6

What is input VAT

Answer 6

VAT payable on goods and services purchased

Question 7

Who charges customers VAT

Answer 7

VAT registered traders

Question 8

What type of VAT does a VAT registered trader charge

Answer 8

output VAT on taxable supplies of goods and services

Question 9

How does VAT work in practice

Answer 9

input VAT is offset against output VAT and any excess is paid to HMRC. any excess VAT paid is reclaimed

Question 10

What is the threshold for registering to become a VAT registered trader

Answer 10

if value of taxable supplies on previous 12 months is more than £85k or likey to be in the next 30 days

Question 11

When can you start to reclaim VAT on business related purchases

Answer 11

once registered

Question 12

What kinds of supplies are taxable to VAT

Answer 12

all unless specifically exempt

Question 13

what are examples of exempt supplies

Answer 13

insurance, finance, education and burial/cremation services

Question 14

what is a partially exempt business

Answer 14

where a business makes exempt and taxable supplies

Question 15

what are zero rated supplies

Answer 15

most food and drink (not catering)
domestic supplies of water and sewage
books and hard copy publications (not ebooks)
sale of new residential buildings
public transport of passengers
drugs medicine and disability aids
childrens clothes and footwear

Question 16

What is the flat rate scheme

Answer 16

it allows small businesses to account for VAT as a percentage of their taxable turnover rather than the difference between input and output

Question 17

what is the flat rate %

Answer 17

16.5% for limited cost traders but % varies according to business sector

Question 18

How is the flat rate set

Answer 18

according to average percentage of gross sales paid over as VAT to HMRC for that sector

Question 19

What is the maximum annual turnover to qualify for the flat rate scheme

Answer 19

£150,000 Excl VAT

Question 20

What is the margin scheme

Answer 20

VAT scheme for dealers in second hand goods

Question 21

How is the VAT calculated on second hand goods

Answer 21

difference between price paid for an item and the price at which it is sold

Question 22

Do sales made to businesse s registered in other EU countries need to charge VAT

Answer 22

No

Question 23

Do sales to individuals in other EU countries need to charge VAT

Answer 23

yes

Question 24

When is the VAT accounted for on acquisition of goods/services from registered traders in other EU states

Answer 24

on next VAT return not on importation

Question 25

What happens if a customer doesn't pay the VAT

Answer 25

no immediate relief for trader

Question 26

How often is VA normally paid

Answer 26

every 3 months

Question 27

if you regularly reclaim VAT from HMRC ow often can you submit and pay VAT

Answer 27

monthly

Question 28

what is maximum annual value of taxable supplies before you can elect fro annual tax return

Answer 28

£1,350,000

Question 29

What else can you elect to do if your annual value of taxable supplies is less than £1,350,000

Answer 29

elect to pay on cash basis instead of invoice basis and can elect for annual tax return.

Question 30

who pays corporation tax

Answer 30

companies

Question 31

what is corporation tax charged on

Answer 31

income and chargeable gains made by companies

Question 32

how i corporation tax accounted for if a companies accounting period straddles 2 financial years with different corporation tax rates

Answer 32

profits are apportioned

Question 33

what is the current rate of corporation tax

Answer 33

19%

Question 34

what is the maximum length of an accounting period

Answer 34

12 months

Question 35

how are chargeable gains calculated for corporation tax

Answer 35

calculated according to capital gains tax rules

Question 36

when was indexation allowance removed

Answer 36

01/01/2018

Question 37

can you offset chargeable losses against trading profit or investment income

Answer 37

no

Question 38

Are entertaining expenses included in taxable profut

Answer 38

yes

Question 39

what do expenses have to be in order to be an allowable deduction

Answer 39

wholly and exclusively incurred for the purpose of business

Question 40

are gift aid allowable expenses

Answer 40

yes

Question 41

when does corporation tax have to be paid

Answer 41

9 months 1 day following end of accounting period

Question 42

how often do large companies pay corporation tax

Answer 42

quarterly

Question 43

What cna trading losses be offset against

Answer 43

other income/ chargeable gains made in the same accounting period

Question 44

how far back can trading losses be carried back

Answer 44

preceding 12 months - must be set against current accounting period first

Question 45

How long do you have to claim trading losses

Answer 45

2 years from the end of the loss making period

Question 46

what is the maximum profit level before losses are reduced

Answer 46

£5 million

Question 47

How is loos relief restricted if profits are in excess of £5 million

Answer 47

£5 millio plus 50% of profits above £5 million

Question 48

what is a close company

Answer 48

a company controlled by 5 or less shareholders or by its directors only

Question 49

what are the benefits for a close company

Answer 49

loans by the company to it's proprietor are not taxable | interest on loans to buy close company shares are an allowable deduction for income tax

Question 50

what is a close investment company

Answer 50

a close company that doesn't trade but has investment income

Question 51

When is a company incorporated overseas a UK resident

Answer 51

if the central management is UK controlled