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Tax
VAT
| Question | Answer |
|---|---|
| VAT is relevant for | sole traders, partnerships, companies who may be VAT registered |
| output VAT | goods, services, capital assets which 'leave the business' |
| input VAT | 'enter the business' e.g., stock, purchases, services used, purchase of capital assets |
| taxable supplies | standard rate where VAT charged at 20% reduced rate where VAT charged at 5% zero-rated where VAT charged at 0% |
| exempt supplies | no VAT at all (input cannot be claimed) |
| standard rated supplies | 20% reclaim input included in registration |
| reduced rated supplies | 5% reclaim input included for registration limits |
| zero rated supplies | 0% reclaim input included in registration limit |
| exempt supplies | no vat cannot reclaim input not included in registration limits |
| standard rated business | selling standard rated supplies registered voluntarily or mandatorily (if taxable > 85,000) |
| zero-rated business | selling zero rated supplies can voluntarily register to reclaim input |
| exempt business | selling exempt supplies not registered for VAT |
| partially exempt businesses | selling taxable and exempt supplies voluntarily or mandatorily registered |
| 2 scenarios for compulsory registration | 1. when taxable supplies of 12 month period > 85,000 2. if taxable supplies expected to exceed 85,000 in 30 days from point in time (big contract) |
| explain if registering when taxable supplies > 85,000 in 12 month period | HMRC notified in 30 days registration begins following month (usually day after) |
| explain if registering on belief taxable supplies > 85,000 in 30 day period | HMRC notified by 30 days registration backdated to start of 30 days |
| when is registration not required | if you can convince HMRC with evidence that taxable supplies in following tax year will not exceed 83,000 |
| de-registration limit | 83,000 |
| pros of voluntary registration | avoids penalties for late registration if happen to exceed limit taxable person can claim back input VAT - important for zero-rated supplies |
| cons of voluntary registration | forces selling price to increase - if employing low cost business model, may lose competitive advantage |
Created by:
amyperston
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