Inputs, Outputs & Schemes. Session Objectives 1. Correctly calculate relevant inputs and outputs using these VAT classifications: standard supplies; exempt.

Inputs, Outputs & Schemes

Session Objectives 1. Correctly calculate relevant inputs and outputs using these VAT classifications: standard supplies; exempt supplies; zero-rated supplies; imports; exports 2. Correctly identify the key features of the following VAT schemes Annual Accounting Cash Accounting Flat Rate Scheme Standard Accounting

AAT Reference Material Available in the exam – but you must revise it prior to the exam so you know where to find the information you need! Glossary

Calculation of VAT

What is the difference between Zero Rated and Exempt Transactions?

Question 1 Net £VAT Rate % VAT £Gross £ 20% 2500.00 1000.005% 125.300% 5% 879.80 1505.2020%

Question 1 Net £VAT Rate % VAT £Gross £ 2083.3420%416.66 2500.00 1000.005%50.00 1050.00 125.300%0 125.30 837.915% 41.89879.80 1505.2020% 301.04 1806.24

Reclaiming input tax Generally straight forward but a few considerations to be aware of

Reclaiming input tax

Fuel Scale Charges C. Di. Oxide Ltd provides a company car to Khan and pays for all his private fuel. The CO 2 emission level of the car is 200 g/km. The scale charge table shows (for a 3 month period): 200 g/km£350 (net)VAT £70.00

Fuel Scale Charges C. Di. Oxide Ltd provides a company car to Khan and pays for all his private fuel. The CO 2 emission level of the car is 200 g/km. The scale charge table shows (for a 3 month period): 200 g/km£350 (net)VAT £70.00 £350 will be added to the total outputs on the company’s VAT return and additional output tax of £70.00 will be payable by the company.

Question 2

ScenarioInclude this on your current VAT return? Yes/No Output/input VAT amount to be included on VAT return a) You provide a valued trader with a case of vodka as a Christmas gift (cost price £96) b) You are a printing business and give each of your 120 customers a desk calendar each year (cost price £1.50) c) You sold goods to a debtor costing £940 inc VAT, issuing them with an invoice on the 28 th March. Your terms of payment are net 30 days. The date is now the 31 st October and your VAT return is now due for completion. Question 2 cont....

d) You purchase a car for the business costing £18,000 plus VAT. The car is given to one of your sales reps to use. e) You purchase a delivery van for £22,000 plus VAT to be used within the business. f) You wine and dine a potential new customer. The restaurant bill totals £56.40 inc VAT ScenarioInclude this on your current VAT return? Yes/No Output/input VAT amount to be included on VAT return Question 2 cont....

g) You sold goods to a debtor costing £1410 inc VAT, issuing them with an invoice on the 30 th April. Your terms of payment are net 60 days. The date is now the 30 th November and it is the end of your VAT quarter. h) Your employees keep records of their personal and business mileage for their cars and only reclaim their business mileage expense element. During the VAT quarter, employees have claimed car expenses totalling £1292.50 inc VAT. ScenarioInclude this on your current VAT return? Yes/No Output/input VAT amount to be included on VAT return Question 2 cont....

Complete Questions 3-4

Trading Overseas

Within the EU Outside the EU

VAT must be paid prior to release into UK by HMRC Imports & Exports

Which countries are in the EU? How many?

Which countries are in the EU? How many? 27

EU Overseas transactions Imports & Exports

Find the information in the reference material!

Question 5 To registered tradersTo non-registered traders Zero-rated Standard-ratedZero-rated Standard-rated Use your reference material

Question 5 To registered traders To non-registered traders Zero-rated Standard-ratedZero-rated Standard-rated Standard-rated

Question 6 - Coleman’s Toys No VAT is charged by the EU supplier so can be ignored by the buyer on their VAT return. Coleman’s must pay output VAT to HMRC at the port/airport and can reclaim the input VAT on their next VAT return. Coleman’s must charge themselves output VAT and reclaim input Vat on the same return

No VAT is charged by the EU supplier so can be ignored by the buyer on their VAT return. Coleman’s must pay output VAT to HMRC at the port/airport and can reclaim the input VAT on their next VAT return. Coleman’s must charge themselves output VAT and reclaim input Vat on the same return Question 6 - Coleman’s Toys

Keeping records List source documents/records for VAT output and input tax

VAT Account

What would be included in the VAT account? VAT Account

What would be included in the VAT account? VAT Account VAT on purchases (PDB) VAT on cash purchases (CB/PCB)

What would be included in the VAT account? VAT Account VAT on purchases (PDB)VAT on sales (SDB) VAT on cash purchases (CB/PCB)VAT on cash sales (CB)

What would be included in the VAT account? VAT Account VAT on purchases (PDB)VAT on sales (SDB) VAT on cash purchases (CB/PCB)VAT on cash sales (CB) (VAT on purchase returns (PRDB)(VAT on sales returns (SRDB)

What would be included in the VAT account? VAT Account VAT on purchases (PDB)VAT on sales (SDB) VAT on cash purchases (CB/PCB)VAT on cash sales (CB) VAT on bad debts (Journal) VAT on EU acquisitionsVAT due on EU acquisitions (VAT on purchase returns (PRDB)(VAT on sales returns (SRDB) (Adjustment – Net over-claim of input tax from previous returns) Adjustment – Net understatement of output tax on previous returns

Keeping records

VAT invoices

Tax collector for the government VAT on Sales – Output Tax VAT on Purchases – Input Tax Difference is paid to OR received from HMRC

Form VAT 100 Difference between output tax and input tax

A trader buys goods for £1,762.00 including VAT at 20.0% and sells them for £2,000.00 plus VAT. How much VAT is paid to HM Revenue & Customs? Question 7 – The tax collector

A trader buys goods for £1,762.00 including VAT at 20.0% and sells them for £2,000.00 plus VAT. How much VAT is paid to HM Revenue & Customs? NetVATGross Purchases Sales Question 7 – The tax collector

A trader buys goods for £1,762.00 including VAT at 20.0% and sells them for £2,000.00 plus VAT. How much VAT is paid to HM Revenue & Customs? NetVATGross Purchases 1762.00 Sales Question 7 – The tax collector

A trader buys goods for £1,762.00 including VAT at 20.0% and sells them for £2,000.00 plus VAT. How much VAT is paid to HM Revenue & Customs? NetVATGross Purchases 1762.00 Sales £1762 ÷ 120 x 20 = £293.66 Question 7 – The tax collector

A trader buys goods for £1,762.00 including VAT at 20.0% and sells them for £2,000.00 plus VAT. How much VAT is paid to HM Revenue & Customs? NetVATGross Purchases 293.661762.00 Sales Question 7 – The tax collector

A trader buys goods for £1,762.00 including VAT at 20.0% and sells them for £2,000.00 plus VAT. How much VAT is paid to HM Revenue & Customs? NetVATGross Purchases 293.661762.00 Sales £1762 - £293.66 = £1468.34 Question 7 – The tax collector

A trader buys goods for £1,762.00 including VAT at 20.0% and sells them for £2,000.00 plus VAT. How much VAT is paid to HM Revenue & Customs? NetVATGross Purchases 1468.34293.661762.00 Sales Question 7 – The tax collector

A trader buys goods for £1,762.00 including VAT at 20.0% and sells them for £2,000.00 plus VAT. How much VAT is paid to HM Revenue & Customs? NetVATGross Purchases 1468.34293.661762.00 Sales 2000.00 Question 7 – The tax collector

A trader buys goods for £1,762.00 including VAT at 20.0% and sells them for £2,000.00 plus VAT. How much VAT is paid to HM Revenue & Customs? NetVATGross Purchases 1468.34293.661762.00 Sales 2000.00400.00 Question 7 – The tax collector

A trader buys goods for £1,762.00 including VAT at 20.0% and sells them for £2,000.00 plus VAT. How much VAT is paid to HM Revenue & Customs? NetVATGross Purchases 1468.34293.661762.00 Sales 2000.00400.002400.00 Question 7 – The tax collector

A trader buys goods for £1,762.00 including VAT at 20.0% and sells them for £2,000.00 plus VAT. How much VAT is paid to HM Revenue & Customs? NetVATGross Purchases 1468.34293.661762.00 Sales 2000.00400.002400.00 Output (Sales) Tax – Input (Purchases) Tax = Balance to HMRC Question 7 – The tax collector

A trader buys goods for £1,762.00 including VAT at 20.0% and sells them for £2,000.00 plus VAT. How much VAT is paid to HM Revenue & Customs? NetVATGross Purchases 1468.34293.661762.00 Sales 2000.00400.002400.00 Output (Sales) Tax – Input (Purchases) Tax = Balance to HMRC 400.00 – 293.66 = £106.34 payable Question 7 – The tax collector

Complete question 7b – 7c

TransactionVAT amount £ Input tax / output tax A trader purchases goods for £102.00 plus VAT The trader then sells these goods for £195.84 including VAT b) For each transaction calculate the VAT amount and indicate whether this would be input tax or output tax. Complete the following (* delete the incorrect phrase): The amount due to* / reclaimable* from HMRC is £…………..

TransactionVAT amount £ Input tax / output tax A trader purchases goods for £102.00 plus VAT 20.40 The trader then sells these goods for £195.84 including VAT b) For each transaction calculate the VAT amount and indicate whether this would be input tax or output tax. Complete the following (* delete the incorrect phrase): The amount due to* / reclaimable* from HMRC is £…………..

TransactionVAT amount £ Input tax / output tax A trader purchases goods for £102.00 plus VAT 20.40 Input Tax The trader then sells these goods for £195.84 including VAT b) For each transaction calculate the VAT amount and indicate whether this would be input tax or output tax. Complete the following (* delete the incorrect phrase): The amount due to* / reclaimable* from HMRC is £…………..

TransactionVAT amount £ Input tax / output tax A trader purchases goods for £102.00 plus VAT 20.40 Input Tax The trader then sells these goods for £195.84 including VAT 32.64 b) For each transaction calculate the VAT amount and indicate whether this would be input tax or output tax. Complete the following (* delete the incorrect phrase): The amount due to* / reclaimable* from HMRC is £…………..

TransactionVAT amount £ Input tax / output tax A trader purchases goods for £102.00 plus VAT 20.40 Input Tax The trader then sells these goods for £195.84 including VAT 32.64 Output Tax b) For each transaction calculate the VAT amount and indicate whether this would be input tax or output tax. Complete the following (* delete the incorrect phrase): The amount due to* / reclaimable* from HMRC is £…………..

TransactionVAT amount £ Input tax / output tax A trader purchases goods for £102.00 plus VAT 20.40 Input Tax The trader then sells these goods for £195.84 including VAT 32.64 Output Tax b) For each transaction calculate the VAT amount and indicate whether this would be input tax or output tax. Complete the following (* delete the incorrect phrase): The amount due to* / reclaimable* from HMRC is £………….. Output tax32.64 Input Tax20.40 Tax due to HMRC12.24

TransactionVAT amount £ Input tax / output tax A trader purchases goods for £102.00 plus VAT 20.40 Input Tax The trader then sells these goods for £195.84 including VAT 32.64 Output Tax b) For each transaction calculate the VAT amount and indicate whether this would be input tax or output tax. Complete the following (* delete the incorrect phrase): The amount due to* / reclaimable* from HMRC is £12.24

TransactionVAT amount £ Input tax / output tax A trader purchases goods for £500.00 plus VAT 100.00 Input The trader then sells these goods for £510.00 including VAT 85.00 Output The amount due to* / reclaimable* from HMRC is £15.00 Q7c - Answer

Question 8 Revision of documentation Reference Material!

Must be included on a full VAT invoice Customer order number Invoice date Description of the goods or services supplied Customers VAT number Sellers VAT number Customers name & address Suppliers name & address Sellers required payment method Rate of settlement discount (if offered) VAT rates applied Amount excluding VAT Amount of VAT charged Question 8 Answer next slide

Must be included on a full VAT invoice Customer order number Invoice date Description of the goods or services supplied Customers VAT number Sellers VAT number Customers name & address Suppliers name & address Sellers required payment method Rate of settlement discount (if offered) VAT rates applied Amount excluding VAT Amount of VAT charged Question 8

Question 9 The invoice should only show the total VAT charges The invoice should show the standard rate VAT and the reduced rate VAT as separate amounts on the invoice The invoice should show the standard rate VAT separately and include the reduced rate VAT in the Gross amount due The invoice should show the reduced rate VAT separately and include the standard rate VAT in the Gross amount due

Task 7 The invoice should only show the total VAT charges The invoice should show the standard rate VAT and the reduced rate VAT as separate amounts on the invoice The invoice should show the standard rate VAT separately and include the reduced rate VAT in the Gross amount due The invoice should show the reduced rate VAT separately and include the standard rate VAT in the Gross amount due Question 9

Complete Question 10 & 11 Answer next slide

Question 10 Answer is £250 Question 11 Answer is the third choice

VAT Schemes Standard Accounting – The default scheme when registering for VAT

Standard Accounting Annual accounting Cash Accounting Flat Rate Scheme Who can use it? What/when do they pay? When do they send a VAT return?

Standard Accounting Who can use it? What/when do they pay? When do they send a VAT return? Advantages/Disadvantages

Annual accounting LEVEL 3 DIPLOMA IN ACCOUNTING INDIRECT TAX FINANCE ACT 2013

Cash accounting LEVEL 3 DIPLOMA IN ACCOUNTING INDIRECT TAX FINANCE ACT 2013

Flat rate scheme LEVEL 3 DIPLOMA IN ACCOUNTING INDIRECT TAX FINANCE ACT 2013

Question 13 Remember to use your AAT reference material! Discuss the scenario you have been given and recommend an appropriate VAT scheme

Fox Ltd manufactures and sells underwear to other businesses. All goods are standard rated and all sales and purchases are made on credit StandardAnnualCashFlat-rate

StandardAnnualCashFlat-rate Mag Azine runs a retail shop selling goods to the public. All sales are for cash and all purchases are made on credit. Mag Azine’s supplies are 98% standard rated.

StandardAnnualCashFlat-rate Play Zoo manufactures children clothing. All sales are zero rated and items are sold to retailers. Sales and purchases are made on credit.

StandardAnnualCashFlat-rate Chelsea Bun runs a small bakery and has a patisserie from which she sells her goods. Her sales are a mixture of mainly zero rated (breads) and some standard rated (hot food to take away) supplies. Patisserie sales are for cash, but she does makes sales of celebratory cakes on a credit basis. Purchases are made on credit.

StandardAnnualCashFlat-rate Ali Baba, a barber, finds keeping detailed records difficult. All his sales are for cash and his purchases are made by cash.

Question 14 Flat rate or standard rate? Ali Baba has in the last year had annual net sales of £102,000, all of which are standard rated. His standard rated net expenses for the corresponding period were £18,000. a)What would be his liability using the Standard Accounting method? b)What would be his liability if he could use a Flat Rate of 10%?

Question 14 Ali Baba has in the last year had annual net sales of £102,000, all of which are standard rated. His standard rated net expenses for the corresponding period were £18,000. a)What would be his liability using the Standard Accounting method?

Ali Baba has in the last year had annual net sales of £102,000, all of which are standard rated. His standard rated net expenses for the corresponding period were £18,000. a)What would be his liability using the Standard Accounting method? Net Amount VAT (20%)Gross Sales102,000 Question 14

Ali Baba has in the last year had annual net sales of £102,000, all of which are standard rated. His standard rated net expenses for the corresponding period were £18,000. a)What would be his liability using the Standard Accounting method? Net Amount VAT (20%)Gross Sales102,000 102,000 x 20% Question 14

Ali Baba has in the last year had annual net sales of £102,000, all of which are standard rated. His standard rated net expenses for the corresponding period were £18,000. a)What would be his liability using the Standard Accounting method? Net Amount VAT (20%)Gross Sales102,00020,400 102,000 x 20% Question 14

Ali Baba has in the last year had annual net sales of £102,000, all of which are standard rated. His standard rated net expenses for the corresponding period were £18,000. a)What would be his liability using the Standard Accounting method? Net Amount VAT (20%)Gross Sales102,00020,400 Question 14

Ali Baba has in the last year had annual net sales of £102,000, all of which are standard rated. His standard rated net expenses for the corresponding period were £18,000. a)What would be his liability using the Standard Accounting method? Net Amount VAT (20%)Gross Sales102,00020,400122,400 Question 14

Ali Baba has in the last year had annual net sales of £102,000, all of which are standard rated. His standard rated net expenses for the corresponding period were £18,000. a)What would be his liability using the Standard Accounting method? Net Amount VAT (20%)Gross Sales102,00020,400122,400 Purchases18,000 Question 14

Ali Baba has in the last year had annual net sales of £102,000, all of which are standard rated. His standard rated net expenses for the corresponding period were £18,000. a)What would be his liability using the Standard Accounting method? Net Amount VAT (20%)Gross Sales102,00020,400122,400 Purchases18,000 18,000 x 20% Question 14

Ali Baba has in the last year had annual net sales of £102,000, all of which are standard rated. His standard rated net expenses for the corresponding period were £18,000. a)What would be his liability using the Standard Accounting method? Net Amount VAT (20%)Gross Sales102,00020,400122,400 Purchases18,0003600 18,000 x 20% Question 14

Ali Baba has in the last year had annual net sales of £102,000, all of which are standard rated. His standard rated net expenses for the corresponding period were £18,000. a)What would be his liability using the Standard Accounting method? Net Amount VAT (20%)Gross Sales102,00020,400122,400 Purchases18,0003600 Question 14

Ali Baba has in the last year had annual net sales of £102,000, all of which are standard rated. His standard rated net expenses for the corresponding period were £18,000. a)What would be his liability using the Standard Accounting method? Net Amount VAT (20%)Gross Sales102,00020,400122,400 Purchases18,0003,60021,600 Question 14

Ali Baba has in the last year had annual net sales of £102,000, all of which are standard rated. His standard rated net expenses for the corresponding period were £18,000. a)What would be his liability using the Standard Accounting method? Net Amount VAT (20%)Gross Sales102,00020,400122,400 Purchases18,0003,60021,600 20,400 – 3,600 = 16,800 Question 14

Ali Baba has in the last year had annual net sales of £102,000, all of which are standard rated. His standard rated net expenses for the corresponding period were £18,000. What would be his liability if he could use a Flat Rate of 10%? Sales Revenue (INCLUDING VAT) £122,400 x 10% = £12,240 Question 14

DescriptionInput VATReclaim input VAT? Car – for personal use by employee£2,010.00Yes / No Customer entertainment£24.90Yes / No Staff party£67.86Yes / No Stationery supplies for the accounts office £172.34Yes / No Raw materials for the manufacturing process £49,000Yes / No New computer - an 18 th birthday present for the managing director’s daughter £108.50Yes / No Repairs to taxable traders garage roof at his home £490.00Yes / No New kitchen equipment for the staff canteen £6,230.00Yes / No Question 15

ItemInput tax recovered Sale proceeds (excl VAT) £ Output tax £ ComputersYes£1,900.00 CarNo£8,280.00 VanYes£15,000.00 MotorcycleYes£4,300.00 Question 16

Question 17

Drawings Goods Cash Output tax due Outside the scope of VAT

Question 18 - Drawings DescriptionOriginal cost £ Replacement cost £ Output VAT £ Goods for own use 300340 Cash drawings 1200 Output tax is calculated on the replacement cost

DescriptionOriginal cost £ Replacement cost £ Output VAT £ Goods for own use 30034068.00 (340 x 20%) Cash drawings 1200 Question 18 - Drawings

DescriptionOriginal cost £ Replacement cost £ Output VAT £ Goods for own use 30034068.00 Cash drawings 1200 0 Outside the scope of VAT Question 18 - Drawings

DescriptionOriginal cost £ Replacement cost £ Output VAT £ Goods for own use 30034068.00 Cash drawings 1200 0 Question 18 - Drawings

Now try Question 19

Question 20 Hand-out

Question 21 Tax point revision

Homework Complete remaining questions in the hand-out. Revision for progress test next week

Inputs, Outputs & Schemes. Session Objectives 1. Correctly calculate relevant inputs and outputs using these VAT classifications: standard supplies; exempt.

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Inputs, Outputs & Schemes. Session Objectives 1. Correctly calculate relevant inputs and outputs using these VAT classifications: standard supplies; exempt.

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Presentation on theme: "Inputs, Outputs & Schemes. Session Objectives 1. Correctly calculate relevant inputs and outputs using these VAT classifications: standard supplies; exempt."— Presentation transcript:

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