Lecture 8- VAT

VAT (Value Added Tax)- An or tax borne by consumer, charged whenever taxable person makes taxable of goods or services in course of his or her

Person who has to & tax to government is not person that VAT because person has to for & VAT to which is registered business

VAT works by each registered or deducting VAT from VAT & pays amount across to HMRC. VAT received in all its sales is known as tax. VAT suffered on its purchases is known as tax

VAT is charged at stage of & is borne by consumer

There is no distinction between & expenditure for VAT. Therefore, if business buys equipment & incurs VAT on cost of equipment, it is part of business's tax. If business sells non-current assets, VAT would be charged on of those assets

Items that are outside scope of VAT include payment of &

VAT is charged when taxable person (, , , or /) makes taxable supply (any supply of or in UK unless specifically exempt) of goods or services in course of (supply for consideration)

Rates of VAT include , &

VAT is charged when there is supply of . This occurs when passes for consideration. Also includes of business assets (small amounts) & goods taken permanently for use by owner

VAT is also charged when there is supply of . This is any supply for consideration that is not supply of . This includes temporary use of goods owned by or use of supplied to business

Everything is taxable supply at unless it is specifically included in list of supplies or supplies or supply that is specifically

Exempt supplies are totally VAT. For exempt supplies, supplier cannot & cannot VAT suffered. Examples include , //, &

For zero rated supplies only making these supplies can for VAT. Business will be charging VAT on at 0%. It will be treated as business & will be able to VAT on its purchases. Examples include (except ), //, & ()

Reduced rate supplies- otherwise as for rated supplies. Examples include & for , of for elderly, children’s , smoking

Value of supply- on which is based ( amount)

Consideration given for supply- of supply plus ( amount)

Value of VAT (of supply) for of business assets, or items taken out of business for private use, is price for which it would have been

Value of VAT (of supply) for goods taken for private use is of asset whilst in use

Value of VAT (of supply) for private use of services is appropriate of services

Value of VAT (of supply) for items where was not for cash or items sold for than market value to connected party is

Trade Discount

Trade discount- Discount given before takes place, & therefore amount, & VAT calculation, is deducting this discount

Early settlement discount- VAT is to be on amount that pays. Invoice will show value of sale before . VAT is shown as follows: (1) if business expects customer takes up , discounted will be shown, & VAT is calculated on price, (2) if customer takes , pays on time, that's of it, (3) if customer does not take new invoice will be prepared to sale & to account for additional VAT, (4) if business does not expect customer to take up , full price will be shown, with VAT on price, (5) if customer does not pay within time, that's end of it & finally (6) if customer does take up , & credit note will be issued

Tax point (date of supply) is used to determine & . Basic tax point is when goods are or made to customer, or on which services are completed. One certain exemption is tax point can be replaced by tax point which may be before/after tax point. Another is payment received before tax point then tax point is date of . Third is invoice issued before tax point then tax point is date of . Finally, invoice issued within days after basic tax point then actual tax point is date of . Therefore, tax point cannot be later than date on which payment is actually

Registration for VAT- When supplies in any -month period exceed (limit from 1/4/17) person is required to . Once registered VAT will be issued & this must be quoted on all future tax . If fails to register they are still treated as taxable person & sales treated by as VAT inclusive. For purpose of determining of £85,000, sales of assets are ignored in arriving at value of supplies. However, it is total by that individual

If someone is in business & their sales are , it is important to keep of monthly rolling month total of to make sure you have not reached on which you have got to & you missed registration

Artificial splitting of businesses- Some traders may try to avoid & may try to artificially split their business into parts to ensure that they keep limits. can direct that artificially split businesses is treated as person for VAT

Trader is required to for VAT within days of exceeding registration - registration applies from start of following . If supplies are going to be > in next 30 days, registration applies from start of these days

Trader may make registration for VAT to make business seem more . Also, it may be that business has mostly supplies (won't be charging VAT but can recover VAT on its . Another reason is are VAT registered

There are certain exemptions from for VAT. Usually, if you are over of £85,000, but all sales are rated for VAT, are not missing out from collection of VAT. When you first register for VAT there are certain items of tax which you can recover (this is VAT suffered on which can be from HMRC in certain circumstances)

Pre-registration input tax for goods (VAT suffered on goods in years prior to registration if they are still by trader at date of ). Pre-registration input tax for services (VAT suffered on services in months before date of

You can deregister for VAT if you can show your supplies in next months is going to be less than . You have to deregister when you trade & also if there is change in your status. On deregistration, if trader does not sell business as , they are considered to have made of all tangible assets of business, & must account for accordingly. Any assets on which VAT was not claimed can be , & VAT in this circumstance is not collected if it is or less

Submission of returns for VAT is now done (since 1/4/10) via . Generally, return has to be done every months & is due month & days after end of . If output tax > input tax, . If input tax > output tax, . Businesses with mostly zero rated supplies can reclaim VAT on & for cash flow purposes, it may be beneficial for them to do returns

Tax invoices- Provides documentary of transaction. It has to have full details such as supplier's , & , point, invoice , & of customer & description of or . Retailers may issue less detailed tax invoice if for less than . They must disclose supplier's , & , date of , description of or supplied, of tax & total amount including VAT

Accounting records must be retained for years & subject to control visits by

One special scheme for VAT is scheme (for businesses). Instead of doing quarterly returns, they can do one return. This can be done if taxable turnover < . They have to make payment on account which is either monthly payments, starting in month or payments in months At end of year return they will do & pay balance months after year end. They have to withdraw from scheme when turnover exceeds

Another special scheme for VAT is scheme. This scheme applies to businesses with turnover < . Business will account for when they receive payments from & will be able to reclaim when they pay their invoices. Advantage of this scheme is that it gives relief for bad debts but to join scheme all VAT & must be up to date, & have no VAT . When turnover > in 1 year & they cannot prove that turnover will return to < in next year, they will have to leave scheme

Third special scheme for VAT is scheme (for businesses). are invoiced in normal way, & invoices received are as normal, but VAT due is calculated as percentage of turnover. Rates vary from to (depends upon business is considered to be in). It is much simpler scheme as you just have to pay over VAT of that percentage of your . Any capital assets costing or more accounted for in normal way. This scheme can be used with scheme. It is available to small businesses with taxable/total turnover not expected to exceed in next 12 months. Trader must leave scheme when total turnover exceeds

Unless you are in scheme, you have to account for when you issue invoice or basic tax point. Therefore, you would have to pay over , may be before you have received from customer. If that amount becomes , you have paid over output VAT which has never been received. Therefore, you get for VAT lost. If consideration was for money & output tax has been accounted for to HMRC, value not more than market value. gets written off & was 6 months old & goods are passed to

There are few items for which you cannot recover input tax (non-deductible) which includes , unless as or for use for business & items used for business

Overall responsibility for administration of VAT is within for HMRC (head office Southend-on-Sea). Local VAT offices are responsible for local & advice, and to undertake visits. They may issue if they believe trader has not made or made incorrect returns

are not normally needed, but will be made if business has not in return, or if one is considered to be or . Time limit for VAT offices to raise an assessment is years after end of period, but years if fraud

Taxpayer can make an against VAT assessment & have days to do this or they can go directly to office to ask them to their decision

There are various penalties for not with VAT regulations which include , to notify that someone should have for VAT, completing VAT returns, VAT “” & of regulations

Default surcharge- Applies if taxable person submits late &/or makes late of VAT. HMRC then issues “” which specifies surcharge period running for months. If further default occurs during this month period, original surcharge period is extended to months from new . In addition, if involves late payment of VAT is levied. penalty is charged as percentage of paid late