21 - VAT

Question 1

At what point does a trader need to register for VAT?

Answer 1

30 days from the end of the month in which the £90k threshold is breached. Registration will apply from the start of the month, the month after the limit is breached (one day after end of month of registration)

Question 2

What is the future test in relation to VAT registration?

Answer 2

If a trader believes the will exceed £90k turnover in the next 30 days, they must inform HMRC within 30 days and registration will start from the first day of the 30 day period

Question 3

What pre-registration costs can be recovered in relation to VAT registration?

Answer 3

• Goods purchased in the last 4 years (if still in stock at date of registration)
• Non-current assets purchased in the last 4 years (if still in use by the business)
• Services supplied to the trader within the 6 months prior to registration

Question 4

When can a business de-register for VAT?

Answer 4

If taxable supplies will not exceed £88k in the next 12 months (this is compulsory if no longer making taxable supplies and automatic is the status of the business changes i.e. sole trader become incorporated)

Question 5

How is VAT on the flat rate scheme calculated?

Answer 5

The trader pays the flat rate on outputs, inputs are ignored

Question 6

In the event that a trader sells their business as a going concern, is there any VAT to pay on the sale?

Answer 6

No. However, if assets are sold individually before the business as a whole is sold, output VAT will need to be paid on those assets .

Question 7

Is overseas client entertainment VATable?

Answer 7

Yes

Question 8

Is UK client entertainment VATable

Answer 8

No

Question 9

Is employee entertainment VATable?

Answer 9

Yes

Question 10

Is the purchase of a car VATable?

Answer 10

No

Question 11

What is the annual turnover threshold you must be below to use the cash and annual VAT schemes?

Answer 11

£1.35m (exclusive of VAT). VAT Returns and payments also need to be up to date to use the cash scheme.

Question 12

What are some benefits to using the cash vat scheme instead of accrual?

Answer 12

• No need to pay VAT if no payment received
• VAT liability become due later as tax point becomes date money is received instead of invoice raised

Question 13

What is the benefit to using the annual accounting scheme?

Answer 13

You only has to submit one return a year so much less admin

Question 14

How are imported goods treated on a VAT return?

Answer 14

They are reverse charged on the day the goods are imported (output VAT accounted for as well as input VAT on the same return, which has a £Nil affect)

Question 15

What is the VAT rate used for overseas sales?

Answer 15

Zero rated supplies

Question 16

What is impairment loss relief available and where are they shown in the VAT return?

Answer 16

When 6 months have passed form the date the payments were due, these are shown in the inputs section of the VAT return.

Question 17

What is an example of continuous supply (VAT) and when is the tax point that VAT is claimable?

Answer 17

Rent (as it is monthly), tax point is payment date so even if 13 months in on year, it is still claimable

Question 18

What is the threshold for the flat rate scheme?

Answer 18

£150k (taxable turnover excluding VAT) for the next 12 months

Question 19

When can you no longer use the flat rate scheme?

Answer 19

When total turnover (including VAT, excluding sales of capital assets) for the previous year exceeds £230k

Question 20

What is the penalty for receiving 4 VAT penalty points?

Answer 20

£200, every late return submitted after that will incur another penalty until all of the points are removed

Question 21

How many returns need to be submitted on time for all VAT penalty points to be removed?

Answer 21

4

Question 22

What is the interest rate charged for late payment of VAT?

Answer 22

7.75% (annual)

Question 23

For services provided to overseas customers, when should the VAT be recorded?

Answer 23

The earliest of:
- When the service is completed
- When the services is paid for
- When the invoice is issued

Question 24

What is the limit for error on VAT returns only being included on the next return?

Answer 24

Anything less than £10,000