What supply of goods are exempt from VAT?
Land
Insurance
Financial services
Education
Health services
Postal services
What supply of goods are outside the scope of VAT?
Sale of shares of a company
Sale of a business as a going concern
What standard VAT rate applies in most transactions?
20%
What supply of goods are subject to VAT but at a rate of 0%?
Food
Books and newspapers
Water
Sewer services
Residential construction
What supply of goods does a reduced VAT rate of 5% apply?
Domestic fuel
Installation of energy saving materials
Child car seats
When must a business register for VAT?
If VAT turnover exceeds the threshold within any 12 month period
OR if it will be exceeded in the following 30 days
Threshold = £90,000
How do you calculate whether the business crosses the VAT threshold?
Do not include exempted supplies
Include zero rated AND reduced rate supplies with other VAT charged goods
When must VAT be registered for and charged by?
Historic test - register 30 days from exceeding threshold, charge from start of next month
Future test - register in the 30 days expected to exceed, charge from date aware it was going to exceed
When may/must a business deregister for VAT?
If turnover falls below £88,000 in any 12 month period
MUST deregister within 30 days if ceases trading
What does opting to charge VAT mean?
Usually sale or lease of land is exempt
Can opt to charge on a commercial property to recover their input tax (on heating cleaning repairs etc)
When may the option to tax be revoked?
Within 6 months of option if VAT hasn’t been put into practice/charged
OTHERWISE cannot be revoked for 20 years and with permission of HMRC
What does the option to tax NOT apply to?
Residential sales or leases
ONLY to commercial
What VAT is the contract to construct a building subject to?
20% automatically
When is the tax point of VAT?
Supply of services or invoice
Earlier of the two
When must businesses file a VAT return?
Electronic VAT return each quarter
What should be included in a VAT invoice?
VAT number
Tax point
Value of supply
Rate of VAT charged
How to determine VAT from VAT inclusive figure?
VAT inclusive DIVIDED by 6
When can a business not reclaim VAT on chargeable supplies?
If the supply to another business relate to any non-business activity
Ie. Use for business and personal reasons
Can only reclaim portion that relates to business
Cannot normally reclaim VAT on a car nor business entertaining
How can businesses who make zero rated supplies reclaim VAT?
Claim input tax from HMRC
Can businesses who make exempt supplies reclaim VAT?
No
They cannot register for VAT and so cannot make a claim from HMRC
What is the consequence of failure to register for VAT when required to do so?
Penalty charge
Percentage of VAT due from when they should have registered
Increased percentage for longer delay
What is the consequence if a person doesnt pay VAT or submits the return late?
HMRC percentage surcharge
Increases up to a max of 15%
What is the consequence of dishonest evasions of tax? What about for repeated lack of care?
Penalty up to tax amount
Unlimited fine
Imprisonment for up to 7 yrs
Penalty of percentage of VAT due
