VAT (Partial Exemption) Flashcards
(25 cards)
what is a supply of goods?
supply of goods involves providing something manufactured/produced for sale
what are also examples of supplies of goods?
- hire purchase agreements
- supply of power
- gifts of business assets
what is a supply of services?
involves doing something for a consideration
what are also examples of supplies of services?
- hiring goods
- temporary use of business assets for non-business purposes
- restaurants
what is a multiple supply?
where there are individual elements within the supply that are treated separately for VAT
what is a single supply?
where there is just one supply, although it may be made up of lots of different things
i.e. one supply has one rate of VAT, but it includes multiple things which have varying rates of VAT
how do you determine whether something is a single or multiple supply?
- nature of the supply (from customer’s perspective)
- each supply should be regarded as
distinct/independent - where one or more elements are supportive to the main supply, it’s a single supply
- the fact that a single price is charged isn’t enough to make it a single supply
partial exemption?
a person making wholly taxable supplies can recover input VAT on purchases and expenses relating to the taxable supply of goods
a person making wholly exempt supplies cannot be a taxable person for VAT and therefore cannot reclaim any input VAT
a taxable person making both taxable and exempt supplies is known as a partially exempt trader
how is input VAT recoverable handled for partially exempt traders?
depends on the supply to which the input VAT relates
- input VAT attributable to exempt supplies made by a partially exempt trader isn’t fully recoverable unless it falls below ‘de minimis’ level
- input VAT relating to taxable supplies can always be recovered in full, even if the trader doesn’t fall below the ‘de minimis’ limits
simplified partial exemption tests?
to determine how much input VAT a partially exempt trader can recover, we first apply the simplified partial exemption test
if the business passes either test 1 of test 2, it can treat itself as de minimis and provisionally recover all input VAT
test 1 for simplified partial exemption tests?
- total input tax is below £625 per month on average, and
- exempt supplies make up less than 50% of all supplies
test 2 for simplified partial exemption tests?
- total input tax less input tax directly attributable to taxable supplies is less than £625 per month on average, and
- exempt supplies make up less than 50% of all supplies
when the question asks in quarterly terms, what must be done?
divide by 3 to calculate on a monthly basis
(3 months per quarter)
standard partial exemption test?
if both simplified tests are failed, the standard test is used to determine how much input VAT is recoverable for the period
what is ‘non attributable input VAT’?
input VAT not directly attributable to either taxable or exempt supplies (e.g., relating to overheads) is apportioned between the two types of supply (exempt and taxable)
the formula is used to determine the portion relating to taxable supplies:
- total taxable supplies / total supplies = % * non attributable input VAT
taxable supplies excludes…
- VAT
- supply of capital items
how does the standard partial exemption calculation work?
total input VAT relating to the taxable supplies is fully recoverable
total input relating to exempt supplies is compared to the standard de minimis limits, and if it falls below both, it can also be recovered - otherwise it’s irrecoverable
standard de minimis limits?
- input tax relating to exempt supplies less than £625 per month on average
- input tax relating to exempt supplies is less than 50% of all input tax
what do you do with the % applied to non attributable input VAT?
round it to the nearest whole number, then apply it to non-attributable VAT
annual adjustment relating to partial exemptions?
at the end of the partial exemption year, the simplified tests are applied to the total figures for the year as a whole
if figures pass test 1 and test 2 for the year as a whole…
recover all input VAT for the year
if figures fail test 1 and test 2 using annual figures for the year as a whole…
perform a full partial exemption calculation using the annual figures
if total VAT recoverable using annual figures doesn’t equal the total VAT recovered so far through quarterly calculations…
an annual adjustment is made to pay/reclaim the difference
can you claim input VAT on cars?
no
