VAT - further aspects Flashcards
(32 cards)
What must a VAT invoice include?
- Supplier’s VAT registration number
- Tax point date
- Description of goods or services supplied
- Rate of VAT
- Amount of VAT payable
When can a trader issue a less detailed invoice?
A trader can issue a less detailed invoice if it is for less than or equal to £250
Must you issue VAT invoices to non-VAT registered customers?
It is not compulsory to issue VAT invoices to non-VAT registered customers unless requested
What do VAT invoices need not include?
- Customer’s order number
- Date of order
- Customer’s VAT registration number
- Method of delivery
When can you find the date for VAT payable?
In the table ‘Payment dates for VAT’
What does the number for VAT errors contain?
VAT errors are aggregated so that the net error is the total under-declaration of VAT less the total over-declaration
What classifies a ‘small error’ that can be corrected on the next return (provided it was not deliberate)?
The higher of:
- £10,000
- If between £10,000 and £50,000, de minimis if less than 1% of turnover
What happens if errors exceed the small errors limit or were a result of deliberate or careless activity?
They must be separately disclosed on form VAT652 and penalties may apply
How long do HMRC have to assess the error if they discover it?
- 4 years to raise assessment
- 20 years if suspect error was deliberate
What are substantial traders?
Those with a VAT liability exceeding £2.3 million per annum. They must make payments on account of VAT
What are the payments on account due for substantial traders?
Payments on account at the end of months 2 and 3 in every quarter are 1/24th of the annual liability for the previous year
Any additional amounts are due one month after the end of the quarter
When does interest accrue for errors made by HMRC?
A taxable person may receive repayment interest only where there has been an error by HMRC leading to overpayment of output VAT or an under claim of input VAT
Interest runs from the later of the date of payment to HMRC and the due date for payment to the date of repayment
How does interest accrue for unpaid VAT?
Interest runs from the date the VAT should have been paid until the date of payment.
HMRC interprets this to mean for the period between those dates - i.e. HMRC does not count the actual due date or the date of payment
When may a taxable person be charged interest on unpaid VAT?
Where:
- HMRC raises an assessment for output VAT under-declared or input VAT over-claimed or,
- The taxpayer voluntarily discloses an error that is not classified as small
No interest is charged where a small net error is corrected on the next VAT return provided the payment for that VAT period is paid on time
What happens after a default occurs for the first time?
The first month a default occurs, a 12 month surcharge period starts from the end of the return period (usually the end of the quarter). There is no default surcharge for the first fault.
When is the default surcharge period extended?
For each further default (i.e. late return or payment) during the surcharge period, the surcharge period is extended to 12 months after the end of the latest period of default
If the VAT has also been paid late, there is a default surcharge based on the outstanding amount. (Tax tables)
What is the 9 month payment option for a trader under the annual accounting scheme?
Must be electronic.
- 9 payments due at the ends of months 4 to 12 of the year
- Each payment is 10% of the previous year’s VAT liability (if it is first year of trading, HMRC will estimate the current year’s VAT liability)
A balancing payment (or repayment) is made when the return is filed or three days later if payment is by direct debit
What is the 3 month payment option for a trader under the annual accounting scheme?
Must be electronic.
- Due at the end of months 4, 7, and 10 of the year
- Each payment is 25% of the previous year’s tax liability (if it is first year of trading, HMRC will estimate the current year’s VAT liability)
A balancing payment (or repayment) is made when the return is filed or three days later if payment is by direct debit
When must the annual return be filed under the annual accounting scheme?
The annual return must be filed within two months of the end of the return period
How can you join the annual accounting scheme?
- A trader’s VAT-exclusive taxable turnover must be expected to be no more than the turnover threshold in the following 12 months: £1,350,000 (tax tables) - including zero related sales but excluding sales of capital assets
- VAT payments must be up-to-date and they must have no convictions for VAT offences or penalties in the previous 12 months
When can a trader leave the annual accounting scheme?
A trader can remain in the scheme until taxable supplies from the previous 12 months have exceeded the turnover threshold: £1,600,000 (tax tables)
What are the advantages to the annual accounting scheme?
- One return helps relieve the burden of administration
- Extra month to submit return and balancing payment
- Regular fixed payments aid budgeting
What are the disadvantages to the annual accounting scheme?
- Not attractive to businesses with declining taxable turnover as payments based on prior year liability
- Not suitable for zero-rated businesses
What is the tax point under the cash accounting scheme?
The tax point becomes the time of receipt (from customers) or payment (to suppliers)
