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 reduced rate of VAT in the UK (5%) applies to which of the following?
Answer: Domestic fuel and power (gas and electricity)
The reduced rate of 5% applies to certain supplies including domestic fuel and power (gas, electricity, solid fuels for heating), children's car seats, and energy-saving materials in residential properties.
When calculating the VAT due on a VAT return, the basic formula is:
Answer: Output VAT minus input VAT = net VAT payable (or reclaimable)
VAT payable (or reclaimable) = Output VAT (VAT charged on sales) minus Input VAT (VAT paid on purchases). If output exceeds input, the difference is paid to HMRC; if input exceeds output, the difference is refunded.
For VAT purposes, the 'tax point' determines:
Answer: When the supply is treated as taking place for VAT accounting purposes
The tax point (time of supply) establishes which VAT period a supply falls into; for goods it is typically the date of delivery (basic tax point), which can be shifted by earlier invoicing or payment.
Which of the following transactions is OUTSIDE the scope of UK VAT?
Answer: Salary paid to an employee
Wages and salaries are outside the scope of VAT — they are not supplies of goods or services in a commercial sense. Only business supplies of goods and services fall within the VAT system.
A business receives a mixed invoice containing both standard-rated and zero-rated items. The business should:
Answer: Charge VAT only on the standard-rated element
Where a single invoice covers supplies taxable at different rates, the appropriate VAT rate is applied to each element separately. Only the standard-rated portion attracts 20% VAT.
A VAT-registered business with repayment VAT returns (input VAT exceeds output VAT) would typically be:
Answer: A business that makes mainly zero-rated supplies (e.g., a food manufacturer)
Businesses making mainly zero-rated supplies (e.g., food manufacturers, exporters) charge little or no output VAT but incur significant input VAT on purchases, resulting in a regular net VAT repayment from HMRC.