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38 Cards in this Set
- Front
- Back
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Describe the historic test for VAT registration |
- look over revenue for past year at the end of each month - if threshold (£81k) has been exceeded, inform HMRC within 30 days - start charging VAT on the 1st of the month following informing HMRC (i.e. breached test in Jan, start charging VAT on 1 March) |
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Describe the future test for VAT registration |
- Look forward on expected revenues for next 30 days (every day) - If sales will exceed VAT threshold in next 30 days, start charging VAT immediately - 30 days from breaching test to notify HMRC |
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How often are VAT returns done (netting off input and output VAT and settling the difference with HMRC)? |
- usually quarterly - if special provisions are in place, may be able to do annual returns with payments on account - if exclusively 0-rated supplies are made (e.g. children's clothing manufacturer), the person will always be reclaiming input VAT, and this can be done every month. |
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When is output VAT charged? |
on the sale of taxable supplies (i.e. not exempt) by a taxable person (i.e. has breached historic or future test) NB - charged at standard rate (20%), reduced rate (5% - e.g. smoking cessation products) or 0 rate (0% - e.g. children's clothes) |
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How does a person making exclusively exempt supplies (e.g. insurance) interact with VAT? |
- Cannot register for VAT, so cannot reclaim any input VAT. |
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What is input VAT? |
VAT suffered on purchases made / expenses incurred by the taxable person - can usually be reclaimed from HMRC. |
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Define a single supply. |
- business makes just one supply (although this may be made up of lots of different things - all are VAT rated the same) so a single rate of VAT applies to the whole supply* * if a few elements are different but merely incidental to the main supply, it is still counted as a single supply. |
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Define a multiple supply. |
There are individual elements within the supply that can be clearly identified - different VAT rates are applied to the different elements. |
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Once a trader is registered for VAT, what must they do? |
Charge output VAT on any taxable supplies made can recover VAT from any input tax. |
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What is blocked input VAT? Give examples. |
when input VAT cannot be recovered, applies to: - purchase of cars if the car will have ANY private use - entertaining (other than staff and overseas customers) - non-business items - items for which no VAT receipt is held |
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How is private fuel treated for VAT? |
If a business has private fuel for a car, there are 2 options: - only recover input VAT relating to business fuel - recover all input tax, but levy a scale charge on itself (the business)* *The scale charge is based on the car's CO2 emissions (in Hardman's) *Scale charge is treated as additional output tax. |
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What are partially exempt traders? |
Trades who make both taxable and exempt supplies. Input VAT attributable to the exempt supplies is not fully recoverable (unless it falls below the de minimis exemption) |
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Explain when all input VAT would be recoverable for a partially exempt trader. |
If one of the 2 de minimis tests are met: 1) Total input tax per month on average <=£625* 2) Total input tax - input tax directly attributable to taxable supplies <= £625 per month on average* *in both cases - exempt supplies must be <=50% of all supplies. |
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How is input VAT apportioned for partially exempt traders? |
- Input VAT directly attributable to taxable supplies is recoverable in full - Input VAT directly attributable to exempt supplies is generally not recoverable - Input VAT not directly attributable to either type of supply needs to be apportioned between taxable and exempt supplies. |
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What is the formula for apportioning input VAT for partially exempt traders? |
Total taxable supplies* / total supplies* = %** x non-directly attributable input VAT * exclude VAT and supply of capital items ** round up to nearest whole percentage NB - the formula above gives the recoverable input VAT, the rest is apportioned to exempt supplies NNB - once this apportionment is done, another de minimis test is applied to the allocated numbers (same £625 and 50% thresholds) - if this test is passed, all input tax for the period can be recovered. |
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What is the annual adjustment calculation for partially exempt traders? |
At the end of the year, the simplifies tests are applied to the total figures for the year as a whole. If the business passes test 1 or 2, then all input VAT can be recovered for the year. If the tests are failed, the trader performs a full partial exemption calculation using the annual figures. If total VAT recoverable does not equal total VAT recovered so far, an annual adjustment is made to pay / reclaim the difference. |
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Explain the new partial exemption test |
- gives businesses the option of applying the de minimus test once a year. - if the business was de minimus in the previous year, they provisionally recover all input VAT - review status at end of year, and if de minimus no longer applies, repay the input tax for exempt supplies in an annual adjustment |
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What property transactions are exempt from VAT? |
- sale of bare land - lease of any building - sale of old (>= 3yrs) commercial buildings - sale of existing residential buildings |
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What property transactions are zero rated for VAT? |
construction and sale of new residential buildings |
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What property transactions are standard rated for VAT? |
- construction of commercial buildings - sale of new (<3 years) commercial buildings * The owner of commercial land and buildings can opt to waive the exemption from VAT. |
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Explain how the option to tax applies to owners of commercial land and buildings. |
- Owner can opt to waive the exemption from VAT, so input VAT would become recoverable - referred to as 'opting to tax' (OTT) - an OTT applies to the whole building |
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What assets are covered by the VAT capital goods scheme? |
- land and buildings >= £250k - aircraft, ships, boats, other vessels bought in 2011 or later >= £50k - Computers & computer equipment >=£50k NB - all threshold figures are net of VAT |
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What is the initial VAT recovery for capital goods? |
- wholly taxable use= recover all input VAT - wholly exempt = cannot recover input VAT - partially taxable use - recover proportion based on proportion of taxable use in quarter of purchase. |
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What are adjustments for use and when are they made? |
For partially taxable use - if the taxable supplies % changes after aquisition, then an adjustment for use is required every year until the end of the adjustment period. |
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What are the adjustment periods for capital assets? When do they run? |
land and buildings - 10 years vessels / computers - 5 years 1st interval = from acquisition to end of VAT return year Subsequent intervals coincide with VAT year |
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How is the annual adjustment for use calculated? |
Total input VAT / 10 or 5 years x (%now - % on initial recovery) NB - annual adjustment is not pro-rated |
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When would an adjustment for sale be needed under the capital goods scheme? |
When a capital goods asset is disposed of during the adjustment period. |
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How is an adjustment for sale calculated? |
- The adjustment is made as normal in the year of disposal (as if the asset had been used for the full year) - A further adjustment is made for the sale (to cover the remaining intervals in the adjustment period): -- if the disposal was taxable assume 100% taxable use -- if the disposal was exempt assume 0% taxable use |
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What must be considered when goods are supplied within the EU? |
1) whether the customer is located within or outside the EU 2) if within the EU, whether the customer is VAT registered or not |
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How are exports out of the EU treated for VAT? |
The export is zero-rated (must have evidence on how / where export was made) - so input VAT is recoverable |
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How are imports into the EU treated for VAT? |
The importer is charged input VAT (can recover this as usual if they are VAT registered) |
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How are supplies from the UK to another EU state treated for VAT? |
The supply is zero-rated, provided: - supplier quotes customer's VAT number on invoice - Supplier has evidence that the goods were delivered to an EU member state. |
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How are supplies from another EU member state into the UK treated for VAT? |
The UK customer must charge themselves output VAT at the local rate. If the purchase relates to taxable supplies this input tax is recoverable as usual. |
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How are supplies (within EU) to someone who is not VAT registered treated? |
Supplier must charge VAT as normal |
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Why would VAT treatment of supply of services vary? |
depends on whether the customer is a consumer or a business |
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How are services supplied to a non-business customer (consumer) treated? |
- the supplier's place of business is used. So a UK supplier will account for UK output VAT regardless of where the customer is situated. |
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How are services supplied to a business customer treated? |
- The customer's place of business is used. So a UK VAT registered customer will account for UK output VAT on supply under the reverse charge system. (if this relates to taxable supplies then input tax can be recovered) |
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What exception is there to determining the place of supply of services? |
- for land related services, the place of supply is where land is situated. |
