Indirect Tax (UK VAT) Flashcards

Which of the following supplies is EXEMPT from UK VAT?

Answer: Insurance services

Insurance services are exempt from VAT in the UK. Exempt means no VAT is charged, but the supplier also cannot reclaim input VAT on costs relating to exempt supplies.

A VAT-registered business can reclaim input VAT on:

Answer: Goods and services used exclusively for taxable business supplies

Input VAT is recoverable only on goods and services purchased and used for taxable business purposes. VAT on customer entertainment and private use is blocked; input VAT relating to exempt supplies is not recoverable.

The VAT flat rate scheme allows a business to:

Answer: Pay a fixed percentage of gross turnover to HMRC instead of calculating input and output VAT separately

The flat rate scheme simplifies VAT accounting for small businesses — they pay a fixed percentage of their gross (VAT-inclusive) turnover to HMRC and keep the difference, rather than tracking individual input and output VAT.

What is the time limit for a VAT-registered business to reclaim input VAT on a purchase invoice?

Answer: 4 years from the invoice date

HMRC allows input VAT to be reclaimed up to four years after the date of the supply (or the invoice date). Claims outside this period are out of time.

A VAT return must normally be submitted to HMRC within how many days of the end of the VAT period?

Answer: 1 calendar month and 7 days

Businesses using Making Tax Digital for VAT must submit their VAT return and payment within 1 calendar month and 7 days after the end of each VAT accounting period.

Zero-rated supplies differ from exempt supplies because:

Answer: VAT is charged at 0% but the supplier can reclaim input VAT on related costs

Zero-rated supplies are taxable at 0%; this means no VAT is collected from customers, but crucially the supplier can recover input VAT on costs attributable to those zero-rated supplies.