1. Should I be registered for VAT?

1. In principle, any person who makes (or expects to make) taxable supplies is required to register with Customs and Excise. This is done by submitting an application form (VAT 1) to the appropriate VAT office.

 

2. From 10 April 2004, a person making taxable supplies is required to apply for registration for VAT purposes at the end of any month if the value of his taxable supplies in the past 12 months exceeded £68,000 ( May 2009) , or at any time there are reasonable grounds for believing that the value of his taxable supplies in the next 30 days will exceed this figure. This is usually increased annually at the time of the Budget.

 

3. The onus to register is on the person carrying on the business.. There are penalties for late registration.

 

4. A trader, whose taxable supplies are below the threshold can apply for voluntary registration.

2. Penalties for errors or under declarations?

Customs have wide powers for the administration of VAT, including the ability to make an assessment where no return has been made. Furthermore, in addition to charging interest on late payments, Customs may impose penalties.

1. A default surcharge of up to 15% may be imposed if a taxable person has not submitted the VAT payment to Customs and Excise within the specified period and he has been in default in the previous 12 months. A misdeclaration penalty of 15% may be charged in the case of errors on the Return. The penalty would not normally be imposed where the net tax misdeclared does not exceed £2,000 or the error is voluntarily disclosed to Customs and Excise.

 

2. If you fail to notify a liability to register for VAT at the appropriate time, Customs may impose a penalty of up to 15% of the tax due.

3. VAT returns?

1. A taxable person must complete a return on form VAT 100 for every VAT accounting period. The completed form, with payment, should be sent to the VAT Central Unit at Southend on Sea to be received by Customs not later than the last day of the month following the end of the period to which it relates. No invoices, schedules or workings are required to be filed with the return.

 

2. For a registered person, the first VAT accounting period commences on the effective date of registration. The final period ceases on the date on which the trader's registration is cancelled.

 

3. Normally the duration of the VAT accounting period is three months.

 

4. The form VAT 100 sets out:

 

1. the VAT due in the period on sales and other outputs;
2. the VAT due on acquisitions from EU states;
3. the VAT reclaimed in the period on purchases and other inputs including acquisitions;
4. the net tax due to or from Customs;
5. statistical information in the form of the value of outputs and inputs for the period (exclusive of VAT);
6. statistical information in the form of the value of supplies of goods to and acquisitions from other EU Member States;
7. details of which retail scheme has been used, if any; and
8. a declaration to be signed by and on behalf of the registered person to the effect that the information given in the return is true and complete.

4. Output Tax

1. Output tax in relation to a taxable person is the tax on taxable supplies which he makes(i.e. his sales), and the acquisition of goods by him from another Member State. Certain services received from outside the UK are also treated as forming part of the output and liable to VAT.

 

2. Output tax is also due on certain "deemed supplies", for example, business gifts, the private use of goods or services, assets held at de-registration and certain self-supplies

5. Input Tax

1. Input tax is the VAT incurred by a taxable person on:

 

1. goods or services supplied to him;
2. acquisitions of goods from other Member States; and
3. importation of goods;

Where exempt supplies are made, it may not be possible to recover all input tax incurred.

2. If input tax can be reclaimed in full, the amount to be claimed is that shown on the tax invoice received from the supplier. In the case of a less detailed tax invoice which does not show VAT separately, input tax is calculated by applying the VAT fraction (currently 3/23, back to 7/47 from 01.01.2010) to the total amount charged, the suppliers VAT number must be on the invoice.

6. When is the VAT due (Tax Point)?

1. The time at which a supply of goods or services is treated as taking place is called the "tax point". VAT must normally be accounted for in the prescribed accounting period in which the tax point occurs and at the rate of tax in force at that time.

 

2. The "actual tax point" overrides the "basic tax point". If the supplier issues a tax invoice or receives payment before the basic tax point, the earlier of these two occasions will decide the actual tax point.

7. VAT on bad debts?

1. Where a trader has accounted for output tax on a supply but has not been paid either in whole or in part by his customer he may be entitled to a refund of VAT in certain circumstances.

 

2. The following conditions must be satisfied before a taxable person is entitled to a refund of VAT under the bad debt provisions:

 

1. supplies were made for a consideration in money and tax has been accounted for and paid to Customs;
2. the whole or part of the consideration has been written off in his accounts as a bad debt;
3. six months from the payment date have elapsed;

8. What are the rules for company cars and petrol?

1. Generally only motor dealers, car hire leasing companies, driving instructors or similar car users qualify to claim VAT input tax on the purchase of a car .

 

2. Where a taxable person supplies a motor car on which input tax has been excluded , VAT is chargeable only on any excess of the selling price over the original purchase price. The excess is regarded as being tax inclusive.

 

3. Where input tax was deductible on the purchase of the car, output tax must be accounted for on the full selling price at the time of sale and a tax invoice should be issued.

 

4. If a motor vehicle is leased (other than under hire purchase or lease-purchase agreements) or hired for business purposes, VAT incurred on the rental can be reclaimed in full if the car is used wholly for business purposes. If used for any private or other non business motoring only 50% of VAT suffered on lease charges can be reclaimed.

 

5. If a vehicle is used for business purposes, VAT on repairs and maintenance can be treated as input tax provided the work done is paid for by the business. This applies even if the vehicle is used for private motoring and even if no VAT is reclaimed on any road fuel in order to avoid use of the scale charges. VAT on repairs etc., covered by a mileage allowance or relating to a vehicle used by a sole trader or partner for private motoring only, cannot be treated as input tax.

 

6. VAT on all road fuel purchased by the business, or reimbursed to employees, can be reclaimed subject to the normal rules of having a valid tax invoice. This applies even if it is used for private motoring.

 

7. Where, in any accounting period, a taxable person supplies fuel for no charge, or a charge below the cash price, to an individual for private use in his own car or a car allocated to him, a supply of fixed value is deemed to have been made. This fixed value supply is known as a scale charge. VAT must be accounted for using the fuel scale charges, which represent the tax inclusive value of the fuel supplied for each car. The scale charges only apply to motor cars. For VAT periods beginning after 1 May 2009 the VAT due per vehicle each quarter is as follows:

9. Requirements of a VAT invoice?

When a registered person makes a standard-rated supply to another taxable person, or makes a supply of goods or services other than an exempt supply to a person in another EU Member State, or receives a payment on account from a person in another Member State, he should issue a tax invoice to that person within 30 days of the time the supply is treated as taking place.

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