ACCA TX Flashcards – VAT

A trader will be able to use the annual accounting scheme provided it is up to date with its VAT returns and payments and its expected taxable turnover for the next 12 months does not exceed £1,350,000. The trader may stay in the scheme until annual taxable turnover is, or is likely to be, greater than £1,600,000 at the end of the accounting year.

A trader will be able to use the cash accounting scheme provided provided it is up to date with its VAT returns and payments and its expected taxable turnover for the next 12 months does not exceed £1,350,000. The trader may stay in the scheme until annual taxable turnover is, or is likely to be, greater than £1,600,000 at the end of the accounting year.

VAT returns are usually submitted on a quarterly basis, but may be submitted on a monthly basis if the trader so chooses, or if eligible for the annual accounting scheme may be submitted on an annual basis.

Relief for irrecoverable (impaired) debts is only available if the output VAT has been accounted for and paid and debt is over six months old as measured from the time that payment was due. The relief is claimed as input VAT on the VAT return.

VAT is chargeable on the actual amount received where a discount is offered for prompt payment. If the discount is not taken the VAT is charged on the full sale price and if the discount is taken then the VAT is based on the discounted price.

The basic tax point is the date goods are made available to the customer or a service completed.

If an invoice is issued or payment received before the basic tax point, then this becomes the actual tax point.

If an invoice is issued within 14 days of the basic tax point, the invoice date will usually become the actual tax point unless an earlier date applies according to the rules above.

The tax point date determines in which VAT return period a transaction is to be allocated.

If it satisfies the conditions for being the transfer of a business as a going concern.

A trader must deregister if the business ceases to make taxable supplies. (A trader may choose to deregister if the level of taxable supplies in the next 12 months will fall below the deregistration limit of £88,000 (VAT exclusive))

On inventory and non-current assets acquired for business purposes within four years of registration and not sold or consumed prior to registration. Services must be supplied for business purposes and were not supplied more than six months prior to registration.

A trader registering for VAT and then making taxable supplies is able to recover the input VAT incurred on its costs and will not suffer a loss in sales due to higher prices if either it makes zero rated sales or if its customers are themselves VAT registered.

A trader may also choose to register for VAT if its sales are approaching the compulsory VAT registration limit so as to avoid any penalties that may arise if it were to miss the compulsory registration date.

It may also be used by a small business to appear larger in order to attract more customers.

HMRC must be notified by the end of the 30 day period in which taxable supplies will exceed £90,000 and the trader will be registered from the beginning of the 30 day period.

A trader must register for VAT if taxable supplies will exceed £90,000 during the following 30 days alone

HMRC must be notified within 30 days after the end of the period when taxable supplies exceeded £90,000 during the previous 12 months and the trader will be registered from the first day of the 2nd month after the limit was exceeded.

A trader making taxable supplies must register for VAT if during the previous 12 months the value of taxable supplies exceeded £90,000. However, VAT registration is not required if taxable supplies in the following 12 months will not exceed £88,000. These figures are exclusive of VAT.

A trader making zero rated supplies may register for VAT and is therefore able to recover any input VAT incurred on purchases and expenses. If a trader only makes exempt supplies it cannot register for VAT and therefore cannot recover any input VAT on such costs.

A trader may make taxable supplies, exempt supplies or some may be outside the scope of VAT. Taxable supplies may be either standard rated or zero rated