Indirect Tax (UK VAT) Flashcards
6 cards from real AAT L3 practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Indirect Tax (UK VAT) flashcards as text
The reverse charge for VAT applies when:
Answer: A UK VAT-registered business receives certain services from an overseas supplier and self-accounts for the VAT
The reverse charge shifts the VAT accounting responsibility from the overseas supplier to the UK customer; the UK business accounts for both output VAT (as if it were the supplier) and input VAT on the same return.
Bad debt relief for VAT is available when:
Answer: The debt is over six months old from the due date, has been written off, and full VAT was originally accounted for
VAT bad debt relief allows a business to reclaim output VAT previously paid to HMRC on a debt that has been written off as irrecoverable and is more than six months overdue from the date payment was due.
Making Tax Digital (MTD) for VAT requires businesses to:
Answer: Keep digital records and submit VAT returns using compatible software
MTD for VAT (mandatory for all VAT-registered businesses) requires digital record-keeping and submission of VAT returns using MTD-compatible software, with a digital link from records to submission.
If a business uses the standard VAT accounting method and a customer does not pay an invoice, the business:
Answer: Has already paid output VAT to HMRC and can reclaim it after 6 months if the debt is written off
Under standard (invoice-based) VAT accounting, output VAT is payable to HMRC when the invoice is issued, regardless of payment. If the customer never pays, the business can reclaim the VAT after 6 months via bad debt relief.
The default surcharge regime for late VAT returns and payments has been replaced by:
Answer: A late submission penalty points system and late payment interest/penalties
From January 2023, HMRC replaced the default surcharge with a points-based late submission penalty regime and a separate late payment penalty system, aiming to be more proportionate for businesses.
A business intending to make only exempt supplies should:
Answer: Not register for VAT as it cannot reclaim input VAT
A business making only exempt supplies is not required to register for VAT (as exempt supplies are not taxable), and there would be no benefit in voluntary registration since input VAT on costs cannot be reclaimed.