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  • VAT Memo - Scope of VAT - What is a supply? - Outside the scope of VAT - 252
    Certain transactions will be outside the scope of VAT, either because they: - do not meet the criteria detailed at ¶25; or - fall within one of the following categories: - supplies that are specifically defined in the legislation as supplies of neither goods nor services (¶258); - compensation or damages (¶264); - supplies of inherently illegal products (¶266); - the loss or destruction of an asset (¶268+); - the issue of new shares by a company (¶2420+); - a business gift costing not more than £50 (¶1465+);...
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  • VAT Memo - Output tax - Time of supply - Bad debt relief - Supplier - Administration - 862
    A claim is made on the VAT return for the accounting period in which entitlement to relief arises. The amount being claimed should be included as part of the overall claim for input tax (currently box 4 of the return). Where suppliers use the annual accounting scheme (¶4745), output tax on the supply can be accounted for and bad debt relief claimed on the same return (assuming that all the other conditions are met).
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  • VAT Memo - Input tax - Recoverable input tax - Partial exemption - De minimis limits - 2194
    These limits are applied when calculating the recoverable input tax on every VAT return and also for the annual adjustment. They are useful for small businesses which incur only minimal amounts of VAT in making exempt supplies. If total exempt input tax (including the exempt proportion of residual input tax and any exempt input tax relating to reverse charges on imported services) is below the de minimis limits (broadly £7,500 p.a.), it is treated as taxable input tax and therefore provisionally recoverable...
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  • VAT Memo - Input tax - Recoverable input tax - Partial exemption - Special situations - Groups - 2264
    Groups of companies may consider a group registration (¶8800+) as a way of improving input tax recovery. Otherwise, inter-company charges (such as recharged salary costs) create unnecessary input tax, which cannot be recovered by any wholly or partly exempt recipient. A VAT group is treated as a single entity trading through its representative member, so only one partial exemption method can apply for the whole group. Subject to a direction from HMRC to the contrary, supplies between group members are disregarded...
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  • VAT Memo - Input tax - Recoverable input tax - Partial exemption - Special situations - Groups - Holding companies - 2266
    A major problem for holding companies is the lack of business activity, as holding (and disposing of) investments, receiving dividends and defending against takeovers do not constitute business activities. -Polysar Investments Netherlands BV v Inspecteur der Invoerrechten en Accijnzen [1991] Often a holding company charges its subsidiaries for management services (for example, the remuneration of directors is often routed through such a company). Provided that these charges are genuine commercial transactions,...
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  • VAT Memo - Input tax - Recoverable input tax - Capital goods scheme - Other consequences - Groups - 2354
    A capital asset may be used for different purposes after the company which owns it joins or leaves a VAT group (¶8800+). For example, a company may have been using a property wholly for taxable purposes before joining a VAT group, but may subsequently lease the property to another group company which makes exempt supplies. Where a company joins a VAT group and has already been making adjustments under the capital goods scheme, the current interval will end on the day before joining. Subsequent intervals end...
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  • VAT Memo - Compliance - Registration - Persons making UK supplies - Compulsory registration - Other taxable persons - 2668
    Unless meeting the criteria for exemption (¶2650+), there are two situations where a trader may be required to register because the value of taxable supplies in a given period exceeds the threshold. They are distinguished by the period under consideration, which is either: - the previous 12 months; or - the next 30 days. The threshold for registration is generally updated each year (¶9960) and registration is compulsory if the cumulative taxable supplies made by the trader in the period exceed the threshold....
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  • VAT Memo - Compliance - Reporting - Returns - 2985
    With very few exceptions (see ¶3003), a registered person must submit VAT returns online for every VAT period, and make payment (¶3160+) of any VAT owed at the same time. A professional agent (such as a VAT advisor) can prepare and submit the return, and correspond with HMRC on the trader's behalf. 1. The professional agent must be authorised by the trader, using a form 64-8 for this purpose. 2. For EU sales lists see ¶9330+. 3. For Intrastat returns see ¶9345+. 4. In cases of incapacity or death and the...
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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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