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Assignment on Value Added Tax (VAT)

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Added on  2020-10-22

Assignment on Value Added Tax (VAT)

   Added on 2020-10-22

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INDIRECT TAX
Assignment on Value Added Tax (VAT)_1
Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................11.1 Identification of sources of information on VAT.............................................................11.2 The way in which an organisation should interact with the relevant government agency11.3 VAT registration requirements.........................................................................................21.4 Identification of information that must be included on business documents of VATregistered businesses..............................................................................................................31.5 Requirements and frequency of reporting under VAT schemes......................................31.6 Maintaining an up-to-date knowledge of changes to code of practice, regulation orlegislation...............................................................................................................................4TASK 2............................................................................................................................................42.1 Extraction of relevant data for a specific period of accounting period............................42.2 Calculation of relevant inputs and outputs.......................................................................52.3 Calculation of the VAT due to or from the relevant tax authority...................................72.4 VAT Return with associated payment within the statutory time limits...........................7TASK 3............................................................................................................................................83.1 Implications and penalties in case of failure to abide by VAT regulations:....................83.2 Adjustments and declarations for any errors or omissions identified in previous VATperiods:...................................................................................................................................8TASK 4............................................................................................................................................94.1 Impact of VAT payment on an organisation’s cash flow and financial forecasts:...........94.2 Advise for relevant people regarding changes in VAT legislation affecting organisation:..9CONCLUSION..............................................................................................................................10REFERENCES..............................................................................................................................11
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INTRODUCTIONAn indirect tax is a tax which is collected by one entity in the supply chain process andpaid to the government of the country, but it is passed to the customer as part of the purchaseprice of a product or service. The customer is ultimately pays the tax by spending more for thegoods and service. Value added tax, service tax, goods and service tax etc. are some of theexamples of the indirect taxes. Value added tax (VAT) was introduced in 1973 and it is nowthird largest source of revenue for the government after income tax and national insurance. Thegiven project is divided into four tasks. First task involves information regarding VAT sources,registration requirements etc. Second task includes information regarding VAT returns, third taskinvolves VAT penalties and adjustments for earlier errors and the last task contains the detailsregarding communication of VAT informations (Adema, Fron and Ladaique, 2014).TASK 11.1 Identification of sources of information on VATVAT is levied on most of the goods which are provided by registered entity in the UKand some of the goods and services which are imported from outside the European Union. Forlevying the VAT and other legal requirements, it is very important to identify the various sourcesof information on VAT. The sources of information of VAT are taxpayers' registrationinformation like tax identification number, information from tax returns, reports and statementslike VAT return with annexes (input tax, turnover and IC acquisition), information on taxpayments like payment acknowledgement, information on the actions which are taken by theadministration of tax like risk analysis, information from the tax administration departments likecriminal cases, explanation registry like organization's economical activities which are given bythe officials of the risky companies and registry by the fictitious companies like taxadministration assumed some companies as risky ones and meeting the certain criteria(examples- registered, using the documents of the third person etc.)1.2 The way in which an organisation should interact with the relevant government agencyThe business organisations should comply with the rules and regulations for operating itsbusiness operations in the country. HMRC relevant government agency of UK that deals with thevarious taxes like value added tax, custom tax, service tax etc. HMRC interact with theorganisation and the government (Bargain and et. al., 2015). There are 25 departments of1
Assignment on Value Added Tax (VAT)_3
HMRC that are established in the UK and that have direct interaction with businesses in thecountry relating to indirect taxes like service tax, custom tax, value added tax etc. For all theissues, these departments can be communicated. The departments of HMRC consist of qualifiedand experienced persons that are available there to provide every possible solution to theseissues.1.3 VAT registration requirementsThe department of HMRC in UK frames the policies for registration under variousindirect taxes like value added tax, service tax, custom duty etc. The threshold limit forcompulsory registration under VAT in the UK is £83,000 of non-VAT exempt income perfinancial year. The threshold limit for compulsory registration in UK for distance-selling is£70000. This threshold limit is based on the VAT taxable turnover of the financial year thatmeans sales that are not exempted from VAT. Distance selling in threshold limit means when aregistered person of a European Union country sells goods to a another country in EuropeanUnion. For registration under VAT in UK the following documents or information are required:National Insurance (NI) numberTax identifier i.e. Unique Taxpayer's reference (UTR) numberCertificate of incorporation and incorporation detailsBusiness banks accounts detailsDetails of all associated businesses within last two yearsDetails of all the business that has been transferred (acquired), if appropriateIf business organisation is dealing in the wholly exempt goods and services then they arenot required to take the registration under value added tax such as insurance and educationbusiness organisation. Companies that do their businesses in UK but don't have any physicalpresence within the UK that is working through online mode, needs to demonstrate that they aremaking sales to UK to have VAT registration. When this process of registration is complete thenregistration certificate is provided to the business organisation that includes VAT number andother details regarding submission of first return (Duclos, Makdissi and Araar, 2014).1.4 Identification of information that must be included on business documents of VAT registeredbusinessesBusinesses that are registered under VAT while preparing invoices must be included inthe information that specifies that business is registered. Business organisations will issue2
Assignment on Value Added Tax (VAT)_4

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