Define VAT
Value Added Tax (VAT) is a tax on sales of goods and services, making it a tax on consumer expenditure.
Who is VAT monitored by?
VAT is administered and regulated by HMRC, a government body with responsibility for a wide range of taxes.
Who is VAT paid by?
VAT is paid by the final consumer, but is collected and paid to HMRC by the businesses involved in the selling and manufacturing processes.
What must a VAT-registered person pay to HMRC?
A VAT-registered person must pay the VAT on sales (output tax) less the tax on purchases (input tax). If inputs > outputs, then a refund is due from HMRC. The amount is calculated on the online VAT return.
Where can you find up-to-date information about VAT?
On the government website.
What is the threshold for registering for VAT?
A business must register for VAT if its annual taxable sales exceed or are likely to exceed within 30 days the £90k VAT registration threshold.
What must a “taxable person” be?
A taxable person must be in business, and can be an individual, partnership, incorporated companies, clubs, or charities that charge VAT on its goods or services.
Can a business register for VAT if they are below the threshold?
Yes, they can voluntarily register if it believes there is an advantage in doing so, for example if they sell zero-rated goods and is able to claim back input VAT paid on expenses related to those sales.
What is the de-registration threshold for VAT?
If the annual VAT taxable sales of a VAT-registered business falls below £88k, they can apply to de-register for VAT.
Where does a business submit there online VAT returns?
A business must submit an accurate online VAT return by the due date to HMRC.
Name one way HMRC regulates VAT?
HMRC will regularly inspect VAT-registered businesses, partly to ensure that they are paying the correct amount of VAT and also to provide help and advice where it is needed.
What is VAT charged by a supplier on a sales invoice known as?
Output tax
What is the form summarising total input and output tax which a business must regularly submit to HMRC known as?
VAT return
How is the amount of VAT due to HMRC is calculated?
Outputs - inputs
What effect does a purchase invoice have on the VAT to be paid by the receiver of the invoice?
It will decrease the amount.
If a business receives a credit note from a supplier, what effect does this have on the VAT due to HMRC?
It increases the liability.
If a customer buys goods from a shop, who will pay the VAT directly to HMRC?
The manufacturer and supplier of the goods, and the shop.
HMRC states that VAT records should be kept by a business for a minimum of how long?
6 years
If a company starts trading on 1/1/25, with a turnover up to and including June 25 of £70k, and in July YTD revenue hits £95k, when does the company need to register for VAT by?
30/08/2025
If a company is due to start up on 1/2/2026 and the taxable revenue in Feb 26 is expected to be £120k, when does the company need to register for VAT?
1/2/26
What must a VAT registered supplier submit to the buyer when providing taxable goods or services, and what will it detail?
A VAT invoice will be issued which details the output tax for the seller and the input tax of the buyer.
How are different VAT rates shown on a VAT invoice?
They must be shown separately, with all VAT rates and amounts shown separately.
Describe a simplified invoice and detail when it can be issued.
A simplified invoice is issued where the total (VAT-inclusive) is less than £250.
Describe a modified invoice and when it is issued?
A modified invoice shows line items both inclusive and exclusive of VAT. They are issued when the total (VAT-inclusive) is greater than £250.
