ACC3140 – Taxation
Unit 15 - VAT
OUTCOMES
Describe the principles of VAT
Identify taxable persons
Distinguish between taxable and exempt, and explain the consequences of both types of supply
Determine whether a trader should register for VAT
Determine the value of a supply
Advise on the VAT treatment of imports and exports
Compute VAT payable to HMRC
Describe the various VAT schemes and explain their relevance
Describe the administration of VAT and the penalties for non-compliance
Explain tax point, bad debt relief, and describe the information to be shown on an invoice.
Advise a trader on VAT liabilities and any planning which could be undertaken to minimise those
liabilities Explain the significance of VAT in the context of a UK company which is a member of a group
with worldwide interests
Making Tax Digital
INTRODUCTION TO VAT
Indirect consumer tax
Multi-staged, self-assessed tax, borne by final consumer
Traders charge VAT on sales to customers: output tax
Reclaim VAT on purchases: input tax
CHARGE TO VAT
Taxable supply of goods or services:
Within the UK
Made by a taxable person
In a business capacity
No need for a profit motive to exist
TAXABLE SUPPLIES
A taxable supply is any supply of goods or services in the UK
Other than a supply which is specifically exempted from VAT
VAT is charged at the standard rate of 20%
Unless the supply is taxed at 5% (reduced rate) or at 0% (zero-rate)
TAXABLE PERSON
Registered or should be registered
‘Business’ is given a very wide definition to include:
trade, profession, or vocation
admission to premises
memberships/ subscriptions
A taxable person should charge VAT to customers and may reclaim input tax
ZERO-RATED SUPPLIES
VAT charged on outputs at 0%
Related input VAT can be reclaimed
A person who only makes zero-rated supplies will often be in a VAT reclaim position
ZERO-RATED SUPPLIES
, Most food Transport
Water and sewerage Caravans and boats
Books, newspapers Gold
Talking books and wireless sets Bank notes
Construction of buildings for residential/charitable Drugs/ Medicines/ Aids
purposes
Women’s sanitary products Exports
International Services Certain international services
Charities Clothing/footwear for children
EXEMPT SUPPLIES
No VAT charged on exempt supply
However, related input VAT cannot be reclaimed
A person who only makes exempt supplies cannot register for VAT
EXEMPT SUPPLIES
Land Health
Insurance Burial and Cremation
Postal Service Trade unions and professional bodies
Betting, gambling, lotteries Sports competitions and sports
Finance Works of art supplied to public bodies
Education One-off fund raising events
Cultural services Investment gold
Reduced rate supplies (all at 5%)
Fuel and power supplied for Contraceptive products
domestic or charity use
Installation of energy-efficient Welfare advice
Unit 15 - VAT
OUTCOMES
Describe the principles of VAT
Identify taxable persons
Distinguish between taxable and exempt, and explain the consequences of both types of supply
Determine whether a trader should register for VAT
Determine the value of a supply
Advise on the VAT treatment of imports and exports
Compute VAT payable to HMRC
Describe the various VAT schemes and explain their relevance
Describe the administration of VAT and the penalties for non-compliance
Explain tax point, bad debt relief, and describe the information to be shown on an invoice.
Advise a trader on VAT liabilities and any planning which could be undertaken to minimise those
liabilities Explain the significance of VAT in the context of a UK company which is a member of a group
with worldwide interests
Making Tax Digital
INTRODUCTION TO VAT
Indirect consumer tax
Multi-staged, self-assessed tax, borne by final consumer
Traders charge VAT on sales to customers: output tax
Reclaim VAT on purchases: input tax
CHARGE TO VAT
Taxable supply of goods or services:
Within the UK
Made by a taxable person
In a business capacity
No need for a profit motive to exist
TAXABLE SUPPLIES
A taxable supply is any supply of goods or services in the UK
Other than a supply which is specifically exempted from VAT
VAT is charged at the standard rate of 20%
Unless the supply is taxed at 5% (reduced rate) or at 0% (zero-rate)
TAXABLE PERSON
Registered or should be registered
‘Business’ is given a very wide definition to include:
trade, profession, or vocation
admission to premises
memberships/ subscriptions
A taxable person should charge VAT to customers and may reclaim input tax
ZERO-RATED SUPPLIES
VAT charged on outputs at 0%
Related input VAT can be reclaimed
A person who only makes zero-rated supplies will often be in a VAT reclaim position
ZERO-RATED SUPPLIES
, Most food Transport
Water and sewerage Caravans and boats
Books, newspapers Gold
Talking books and wireless sets Bank notes
Construction of buildings for residential/charitable Drugs/ Medicines/ Aids
purposes
Women’s sanitary products Exports
International Services Certain international services
Charities Clothing/footwear for children
EXEMPT SUPPLIES
No VAT charged on exempt supply
However, related input VAT cannot be reclaimed
A person who only makes exempt supplies cannot register for VAT
EXEMPT SUPPLIES
Land Health
Insurance Burial and Cremation
Postal Service Trade unions and professional bodies
Betting, gambling, lotteries Sports competitions and sports
Finance Works of art supplied to public bodies
Education One-off fund raising events
Cultural services Investment gold
Reduced rate supplies (all at 5%)
Fuel and power supplied for Contraceptive products
domestic or charity use
Installation of energy-efficient Welfare advice
