VAT: Further Aspects

Question 1

What must a full VAT invoice include?

Answer 1

The word invoice
Unique identification number
Business name, address and contact info
Customer name and address
Clear description of goods/service
Date of invoice
Tax point if different
Price,
Quantity,
& VAT rate
For each item
And discount offered
Amount it charged excl VAT
Total VAT charged

Question 2

Is it compulsory to issue VAT invoices to non VAT registered customers

Answer 2

No

Unless requested

Question 3

When can a trader issue a simplified VAT invoice?

Answer 3

Less than of equal to
£250
VAT inclusive

Question 4

When can a trader issue a modified VAT invoice?

Answer 4

Retail supplies
(Over £250)

Question 5

How must all VAT registered businesses submit returns?

Answer 5

Electronically

Question 6

VAT return form

Answer 6

VAT100

Question 7

What does VAT100 show?

Answer 7

Total input VAT
Total output VAT

For the period

Question 8

Who can opt to have shorter VAT return periods?
(To receive their repayments earlier)

Answer 8

Traders who regularly receive payments

Question 9

What is the shorter VAT return period?

Answer 9

Monthly

Question 10

VAT return due date

Answer 10

Same as for payment of VAT
(Where payment is not made by DD)

Question 11

When is VAT payable?
(On TTs)

Answer 11

Due one month and seven days
After end of the quarter

Question 12

What happens if a trader doesn’t submit a VAT return?

Answer 12

HMRC can issue an assessment
Showing the amount HMRC believes is due

Question 13

How are VAT errors treated?

Answer 13

Aggregated
So that the net error is the total under-declaration of VAT less the total over-declaration

Question 14

When are errors on VAT returns corrected?

Answer 14

On the next return
As long as it was
Small
And
Not deliberate

Question 15

VAT: Small errors

Answer 15

Higher of:
10k
1% taxable turnover
(VAT exclusive)
Subject to a limit of 50k

Question 16

Penalty for small errors disclosed on next VAT return

Answer 16

None

As long as neither careless nor deliberate

Question 17

How are errors that are not small, or were deliberate treated?

Answer 17

Separately disclosed
On form VAT652

And penalties may apply

Question 18

Due date for VAT return

Answer 18

Same as for payment of VAT

Except when payment made by DD

Question 19

When are payments taken when a trader pays VAT by DD?
(In TTs)

Answer 19

Three working days
After normal due date
(I.e. 1m10d after end of quarter)

Question 20

VAT: Substantial trader

Answer 20

VAT liability
Above
£2.3m
P.a.

Question 21

What must VAT substantial traders make ?

Answer 21

Payments on account of VAT

Question 22

VAT: Substantial traders: Payment timings

Answer 22

Months 2 and 3
In every quarter

Question 23

VAT: Substantial traders: Amount of each payment

Answer 23

1/24th
Of annual liability
For previous year

Question 24

VAT: Substantial traders: When are additional amounts due?

Answer 24

1m after end of the quarter

Question 25

When can a taxable person receive VAT repayment interest?

Answer 25

Error by HMRC Leading to: Overpayment of output VAT Or Under claim of input VAT

Question 26

When does VAT repayment interest run?

Answer 26

Later of: Date of payment to HMRC Due date for payment To Date it repayment

Question 27

When does interest on unpaid VAT run?

Answer 27

Date should have been paid To Date if payment (Exclusive)

Question 28

VAT: When may a taxable person be charged interest?

Answer 28

1. HMRC raises assessment for Under-declared output VAT Over-declared input VAT 2. Taxpayer voluntarily discloses error That is not small

Question 29

VAT: Is interest payable when small net error is corrected on the next VAT return Provided payment for that VAT period is paid on time

Answer 29

No

Question 30

Penalty if fails to register for VAT /registers late/is incorrect

Answer 30

Common penalty regime

Question 31

When does a VAT default occur?

Answer 31

Taxable person: 1. Files return late 2. Makes payment late

Question 32

Penalty when VAT paid late

Answer 32

Default surcharge

Question 33

VAT: Default surcharge: First default

Answer 33

None

Question 34

What happens when first VAT default occurs? (For businesses)

Answer 34

Surcharge period starts

Question 35

VAT: How long is default surcharge period?

Answer 35

12m (Starting from end of return period) (Usually end of the quarter)

Question 36

Penalties for each VAT payment missed during surcharge period

Answer 36

Growing

Question 37

What happens first time VAT default occurs: Businesses with taxable turnover below 150k

Answer 37

Letter offering help

Question 38

VAT: What happens if default occurs within 12m of letter of help?

Answer 38

Surcharge period starts and normal surcharge system begins (Effectively additional chance to default) (Assume business is not small)

Question 39

What happens if trader satisfies HMRC that there’s a reasonable excuse for filing a VAT return late?

Answer 39

The default will be ignored

Question 40

VAT: What happens for subsequent defaults (return or payment)

Answer 40

Surcharge period extended to end 12m after end of latest period of default If VAT also paid late, default surcharge based on outstanding amount (TTs)

Question 41

VAT: Annual accounting schemes return frequency

Answer 41

Annual

Question 42

VAT: Annual accounting scheme return: Deadline

Answer 42

2m Of end of return period

Question 43

VAT: Annual accounting schemes return: Can traders take advantage of additional 7d when filing the VAT return?

Answer 43

No

Question 44

VAT: Annual accounting schemes: Payments frequency: 2 options

Answer 44

1. 9 payments 2. 3 payments

Question 45

VAT: Annual accounting schemes: 9 payments: due when?

Answer 45

End of months 4-12

Question 46

VAT: Annual accounting schemes: 9 payments: amount of each payment

Answer 46

10% of previous year’s VAT liability Time apportioned

Question 47

VAT: Annual accounting schemes: 6 payments: due when?

Answer 47

End of months 4,7 and 10

Question 48

VAT: Annual accounting schemes: 6 payments: payment amount?

Answer 48

25% of previous year’s VAT liability

Question 49

VAT: Annual accounting schemes: When balancing payment/repayment made? Not DD

Answer 49

When return filed

Question 50

VAT: Annual accounting schemes: When balancing payment/repayment made? When DD

Answer 50

3 days after return filed

Question 51

VAT: Condition to join annual accounting scheme

Answer 51

Trader’s VAT-exclusive Taxable Turnover (Including zero-rates sales) (Excluding sales of capital assets) Must be expected to be NO MORE THAN THE TURNOVER THRESHOLD In the following 12m

Question 52

VAT: Turnover threshold to join the scheme (TT I think)

Answer 52

1,350,000

Question 53

VAT: Turnover threshold to leave the scheme (TT I think)

Answer 53

1,600,000

Question 54

VAT: Joining annual accounting scheme: Other conditions

Answer 54

Traders returns and payments must be up to date No convictions for VAT offences Or penalties In prev 12m

Question 55

VAT annual accounting scheme: Leaving scheme threshold

Answer 55

Taxable supplies From prev 12m Exceed turnover threshold

Question 56

VAT annual accounting scheme: Advantages

Answer 56

1. 1 return. Less administration 2. Extra month (For return and balance g payment) 3. Regular fixed payments (Budgeting)

Question 57

VAT annual accounting scheme: Disadvantages

Answer 57

1. Payments based entirely on previous year liability So unattractive to businesses with declining taxable turnover 2. Not suitable for zero-rated businesses

Question 58

VAT: Cash accounting scheme: Operation

Answer 58

Based on cash receipts and payments (Rather than using dates of invoices issued and received)

Question 59

VAT: Cash accounting scheme: Tax point

Answer 59

Time of receipt or payment

Question 60

VAT: Cash accounting scheme: Conditions for joining

Answer 60

VAT-exclusive taxable turnover (Including zero-rated sales but excluding sales of capital assets) Expected to be **No more than Turnover threshold** In the following 12m

Question 61

Turnover threshold to join VAT cash accounting scheme

Answer 61

1,350,000

Question 62

VAT cash accounting scheme: Threshold to leave the scheme

Answer 62

1,600,000

Question 63

VAT: Other conditions for joining cash accounting scheme

Answer 63

Same as annual accounting scheme

Question 64

VAT: Cash accounting scheme: Advantages

Answer 64

1. No output VAT selling on credit until received payment 2. Automatic bad debt relief 3. Can combine with annual scheme

Question 65

VAT: Cash accounting scheme: Disadvantages

Answer 65

1. Input tax not claimed until invoice paid Delays recovery of input VAT 2. Not suitable for cash sales Or zero-rated businesses (Just delays recovery)

Question 66

VAT: Flat rate scheme: Operation

Answer 66

Flat rate % Applied to gross (VAT inclusive) Total turnover (Exclusive of zero rated and exempt supplies)

Question 67

VAT: Flat rate scheme: % varies based on

Answer 67

Type of trade business is involved in

Question 68

VAT: Flat rate scheme: deduction conditions + amount (Included in Q)

Answer 68

1% First year of registration

Question 69

VAT: Flat rate scheme: Limited cost traders (Very low cost base e.g. IT contractors): %

Answer 69

16.5 %

Question 70

VAT: Flat rate scheme: How are invoices issued?

Answer 70

As usual (With VAT charged at applicable rate)

Question 71

VAT: Flat rate scheme: How are input VAT records kept?

Answer 71

None are kept Because not separately recovered

Question 72

VAT: Flat rate scheme: Joining limit

Answer 72

150,000

Question 73

VAT: Flat rate scheme: Leaving limit

Answer 73

230,000

Question 74

VAT: Flat rate scheme: Advantages

Answer 74

1. Less admin (no input records) 2. Possibly less VAT 3. Can use with annual scheme

Question 75

VAT: Flat rate scheme: Disadvantages

Answer 75

1. Not suitable for zero rated businesses (Just delays input recovery) 2. Not suitable for businesses with high input tax compared to their sector average