Chapter 1

Question 1

What is VAT?

Answer 1

An indirect tax on consumer spending
Charged on most goods and services supplied within the uk
Suffered by the final consumer
Collected by businesses on behalf on HMRC

Question 2

When is VAT collected?

Answer 2

By businesses each stage in the production and distribution process of supplying goods and services

Question 3

What happens if a customer is VAT registered and uses the goods for services for business purposes?

Answer 3

Then the customer can recover the tax which was paid over the purchase of the item or service

Question 4

Why is Vat indirect tax?

Answer 4

Because it is paid directly to traders when you buy most goods and services rather than being collected directly by HMRC from the tax players as a portion of their income or gains

Question 5

Who charges VAT?

Answer 5

By a taxable persons, when they make taxable supplies, in the course of their business

Question 6

What is the relevant ledger account for VAT?

Answer 6

The VAT control account such as VAT account

Question 7

What does making digital software do when VAT has been put in the VAT account?

Answer 7

Extract information from the VAT accountant automatically completes the VAT return the businesses them reviews the draft return to check the figures are correct before sending to HMRC

Question 8

What is taxable persons?

Answer 8

Businesses which are registered for VAT

Question 9

What are taxable supplies?

Answer 9

Many sales made by a taxable person, taxable supplies can also include gifts and goods taken from the business for personal use

Question 10

What is output tax?

Answer 10

Vat charge on sales or taxable supplies

Question 11

What is input tax?

Answer 11

Paid by a business on purchases or expenses

Question 12

Can VAT registered businesses reclaim their input tax?

Answer 12

Yes they do this by deducting the input tax they have paid from the output tax that they owe and paying HMRC for the net amount only

Question 13

Define exempt supplies

Answer 13

Suppliers at the law state should not have VAT charged on them such as insurance

Question 14

Define outside the scope of vat

Answer 14

The VAT doesn’t apply to them such as wages and dividends they ignored for VAT purposes no VAT charged and no VAT is reclaimed

Question 15

What are the differences between zero rated and exempt supplies?

Answer 15

Zero rater can register for VAT can charge VAT to customers and can recover input tax whereas exempt cannot

Question 16

Examples of zero rated tax

Answer 16

Water most food books and newspapers, public transport children’s clothes, new house building

Question 17

Example of exempt tax

Answer 17

Rent insurance postal services finance education betting and lottery

Question 18

What is the tax point/time supply?

Answer 18

The date on which the liability for output tax arises it is the date on which a suppliers recorded is taking place to the purposes of VAT return

Question 19

What happens if the rate of VAT changes?

Answer 19

Then all supplies with tax point up-to-date of change will be at the Old rate and all supplies on or after the date of change will be at the new rate

Question 20

What is the basic tax point for goods?

Answer 20

The date when goods are removed, which usually means the date of delivery of those goods or the date the customer takes the goods away

Question 21

When does a tax point also occur?

Answer 21

If goods are not removed but I made available to a customer for example if a specialist installer is instructing a new machine for a customer on site in the factory the tax point will occur when the machine is handed over and not when the materials are delivered to site

Question 22

What is the basic tax point for services?

Answer 22

The tax point is the date the services are performed or completed

Question 23

What two situations is the basic tax point amended in?

Answer 23

Early tax point or late tax point

Question 24

What is earlier tax point?

Answer 24

Tax invoice is is issued or a payment is received on before the basic tax point

In this circumstances, the day of invoice or payment is a time when the suppliers is treated as taking place

Question 25

What is late tax point?

Answer 25

Tax invoices issued within 14 days after the basic tax point In these circumstances, the date of issue of the invoice is the time when the supply treated is taking place

Question 26

What happens if the tax point does not apply?

Answer 26

Then the late tax point can be considered

Question 27

What happens if the invoice is issued within than 14 days of the basic tax point?

Answer 27

The invoice statement becomes the actual tax point

Question 28

What happens if written approval is received from the VAT written enquiries team?

Answer 28

The 14 day rule in respective issuing tax invoices can be varied

Question 29

With a agreement, the 14 day rule can be varied to accommodate a supplier who?

Answer 29

Usually issues or invoices each month on the last day of the month and would like the month-end invoice date to be the tax point date

Question 30

The 14 day rule cannot apply to what

Answer 30

Invoices that are only for zero rated goods these are not VAT invoices because 0% is not a positive rate of VAT

Question 31

Zero rated supplies the tax point is the earlier of

Answer 31

When the goods are made available and the receipt of payment

Question 32

Exports of taxable goods are zero rated, so the tax point for these goods is always the earlier of

Answer 32

The supply of goods, when the goods are sent to the customer and the receipt of payment

Question 33

What is created when a business received a deposit or part payment in advance?

Answer 33

A tax point when the deposit is received

Question 34

What is a pro forma invoice?

Answer 34

If a customer requires an invoice for the deposit or advance part payment

Question 35

When is the tax point not created for a deposit?

Answer 35

Whether deposit will be returned back to the customer and their item is brought back safely

Question 36

The tax rules stop goods being held for more than a year without tax being due. The basic tax point therefore occurs at the earliest of.

Answer 36

The date the goods are adopted The date payment is received Expiration of the time limit for adopting the goods 12 months from the date the goods were dispatched

Question 37

What is continuous supplies?

Answer 37

Some services are performed over a long period but invoiced at regular intervals rather than when the service is completed

Question 38

If services are performed on a continuous basis with payments received regularly or times time there is a tax point each time there is payment which is the earliest of

Answer 38

The date of invoice issued or the date of payment is received

Question 39

What can be issued if payments are due to be made at regular intervals?

Answer 39

Vat invoice can be issued at the start of any period of up to 1 year to cover all payments during that period

Question 40

For each payment made in continuous supplies the business should set out the following

Answer 40

VAT exclusive amount, date on which the payment is due, rate of VAT, VAT payable

Question 41

HMRC have certain powers that help it administer a VAT

Answer 41

Inspecting premises, examining records, making assessments unpaid tax, charging penalties for breaches of VAT rules, determining whether certain supplies are reliable for VAT

Question 42

How many days notice is normally given for a visit by VAT officer?

Answer 42

7

Question 43

When can an assessment be issued?

Answer 43

Within two years of the relevant VAT period extended four years if new evident comes to light however this increases to 20 years if this is found to be a result of deliberate conduct

Question 44

How long does a train have to appeal the assessment?

Answer 44

30 days

Question 45

What are the choice of actions if an disagreement cannot be agreed between the taxpayer and HMRC?

Answer 45

Ask her the case to be with you by another officer The taxpayer can appeal to tax tribunals