Step 2 - chapter 3

VAT is usually rounded _____ to the nearest 1p

down

can’t recover input tax on:

• UK business entertaining

• Cars

• Private use items

can recover _____ entertaining, and ______ customers

staff

non-UK

Imports

pay input tax at border or via postponed accounting

exports

always zero-rated

input tax re exempt supplies is recoverable if meet ______

de minimus test

always assume the car is for private use, unless said otherwise

no input tax can be recovered

no output tax charged on disposal either as this will be an exempt supply

cars only used for business purposes, mean VAT can be recovered e.g. ….

• pool cars

• taxi business

• driving instructor

van is for business, so can recover input tax

t/f

t

fuel scale charge

output tax charge to offset against the input tax reclaimed on fuel purchased for private use

fuel for private use

• ensure the individual keeps sufficient mileage records so that the input tax on just the business miles can be recovered

• reclaim all the input VAT suffered on the fuel, but then account for some output tax using the fuel scale charge

• agree not to reclaim any input tax on fuel purchased

A VAT-registered business can reclaim all the input tax on road fuels if it keeps detailed records of business and private mileage, and makes no adjustment

t/f

f

adjust for private use

partially exempt traders

business makes a mixture of taxable and exempt supplies, to claim input tax on the taxable supplies, it needs to pass the minimus test

partially exempt traders:

1. only charge output tax on their taxable supplies

2. can reclaim input tax on all purchases directly related to taxable supplies

3. reclaim a proportion of input tax using the equation: T/T x E

value of taxable supplies/total supplies made X input tax not directly attributable

overseas transactions: determining the place of supply

goods:

supplied from there they originate - in the UK = UK supply

overseas transactions: determining the place of supply

services:

if to a VAT registered business (BTB), then where the customer is located

if not VAT registered (BTC), supplier’s VAT rules

international exports: goods

always zero rated, provided the trader obtains evidence of their export within 3 months

overseas buyer will pay their own rate in their own country

international exports: services

BTC: UK VAT applied to the sale

BTB: customer’s VAT applied

international imports: goods

no VAT is charged to the supplier

purchaser pays the UK VAT at customs

postponed accounting

goods imported are charged at the same rate as goods purchased in the UK

the tax is added as output tax on its next VAT return via postponed accounting

exports are always zero rated

t/f

t

goods use ___________ and services use ____________

postponed accounting

reverse charges

for a business making a mixture of standard rated, zero rates and exempt supplies, they can reclaim ___ input tax provided they meet the de minimus test.

not just that of the sr and zr supplies

all

What is the VAT impact if a UK VAT registered business exports goods overseas?

zero rated