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1 to 10 of 16 articles
  • VAT Memo - Input tax - Recoverable input tax - 2070
    Once deductible input tax (¶1800+) has been identified and verified as eligible (¶1950+), recoverable input tax can be calculated. For a trader who is making only taxable supplies, all eligible input tax will be recoverable, subject to the special rules for traders who are newly registered or who are deregistering (¶8550+). In any other case, partial exemption and the capital goods scheme must be considered. The following table indicates when these subjects are relevant: Situation Partial exemption (¶2075+)...
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  • VAT Memo - Input tax - Recoverable input tax - Partial exemption - Special methods - Types of method - Obtaining approval - 2170
    HMRC will not approve an application unless the business makes a declaration that to the best of its knowledge and belief the method will produce a fair and reasonable recovery of input tax. - A declaration is required every time a new method is approved, or an existing one is amended. The declaration must confirm that the whole method produces a fair result (both from the effective date of its application and for the foreseeable future) based on knowledge that the person making the declaration could reasonably...
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  • VAT Memo - Input tax - Recoverable input tax - Capital goods scheme - 2280
    This scheme is mandatory but only applies to traders who: - incur input tax on computers, ships and aircraft, and land-related property interests, where the assets are of a prescribed minimum value; - buy the assets for business purposes; and - are involved in the making of both taxable and exempt supplies at any time in the subsequent 5 or 10 years (the period depends on the type of asset). If no VAT is incurred on the acquisition of the asset, the asset will not be within the scheme. Similarly, a trader who...
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  • VAT Memo - Input tax - Recoverable input tax - Capital goods scheme - Other consequences - Transfer of a going concern - 2350
    When a trader transfers a business as a going concern (¶8646+) and a qualifying asset (¶2290+) is transferred as part of the arrangement, the responsibility for making adjustments under the scheme passes to the new owner. The provisions relating to a sale do not apply. The overall cost of the asset to the purchaser will therefore depend on the subsequent adjustments which must be made. A fully taxable company constructs a new building at a cost of £1 million plus VAT of £200,000. The building is used 100%...
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  • VAT Memo - Compliance - Records - General requirements - Retention of records - Period - 2797
    The standard rule is that the minimum time for which records should be retained is 6 years. This is extended to 10 years for businesses making digital supplies to consumers and using the VAT MOSS (¶7000+) online service to make returns. In relation to land and buildings, longer periods apply to properties covered by the capital goods scheme (¶5750+), or over which an option to tax has been exercised (¶5602+). The requirements are the same for electronic records and for paper. Failure to meet these requirements...
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  • VAT Memo - Compliance - Records - The VAT account - 2820
    Every trader must keep a VAT account, which is a summary of the total output tax and input tax for each VAT period (¶2987+). Usually VAT is added up at convenient intervals, such as at the end of each month. The account may be kept in any form, although HMRC gives a very simple example as a guide. Any VAT adjustment notified by HMRC should be excluded from the VAT account, unless the trader is specifically told to include it. The amounts calculated in the VAT account are then transferred to the VAT return...
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  • VAT Memo - Simplified accounting schemes - Flat rate scheme and annual accounting scheme - Flat rate scheme - General principles - Exclusions - 4648
    The following table summarises the circumstances in which a person will not be eligible to use the scheme: Reason for exclusion Details ¶¶ Business circumstances Using the margin scheme or auctioneers' scheme ¶6625+, ¶6750+ Intending to use the capital goods scheme ¶2280+ Eligible for a VAT group registration within the last 24 months ¶8800+ Part of a VAT divisional registration within the last 24 months ¶2744+ Associated with another person within the last 24 months ¶4650 Tour operators ¶7490+ Offences...
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  • VAT Memo - Simplified accounting schemes - Flat rate scheme and annual accounting scheme - Flat rate scheme - Leaving the scheme - Compulsory termination - Ceasing to be eligible - 4716
    A person must notify HMRC within 30 days, and leave the scheme, if they become ineligible for any of the reasons set out in the following table: Reason ¶¶ Date business must leave Deciding to use the margin scheme or auctioneers' scheme ¶6625+, ¶6750+ Start of VAT period in which decision made Intending to use the capital goods scheme ¶2280+ Date on which intention or expectation occurred Becoming a tour operator ¶7490+ Date on which person became a tour operator Becoming eligible to join a VAT group,...
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  • VAT Memo - Particular activities - Land and property - Land and existing buildings - Option to tax - Unaffected supplies - 5638
    Certain land or buildings are unaffected by an option to tax. This means that the supply of such land or buildings will either be exempt or outside the scope of VAT, rather than standard-rated. Where, as a consequence, the supply is exempt, the vendor or landlord cannot recover associated input VAT and may wish to increase the asking price or rent to reflect the VAT cost. The following paragraphs detail the situations where the option does not apply. The only situation where an opted property can be transferred...
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  • VAT Memo - Particular activities - Land and property - Input tax - capital goods scheme - 5750
    Input tax recovery relating to most properties is governed by the capital goods scheme, which is mandatory and applies to all traders who: - incur input tax on property interests which are valued at £250,000 or more (exclusive of VAT); - buy, or use, the property for business purposes; and - are involved in the making of both taxable and exempt supplies at some time in the next 10 years. It is important to note that where a property is acquired and disposed of within a 10-year period and the sale is not taxable,...
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