Indirect Tax INTRODUCTION 1 TASK 11
Added on 2020-12-24
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Indirect Tax
Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................11.1 Identification of sources of information on VAT.................................................................11.2 Interaction between organisation and relevant government agency.....................................21.3 VAT Registration requirements............................................................................................21.4 Information need to be disclosed as business documentation of VAT registered businesses.....................................................................................................................................................21.5 Requirements and frequency of reporting for various VAT schemes...................................31.6 Maintenance of up-to-date knowledge of changes to codes of practice, regulation orlegislation....................................................................................................................................4TASK 2............................................................................................................................................42.1 Extract relevant data for a specific period from the accounting system...............................42.2 Calculations of Input and Output VAT for data extracted....................................................52.3 Calculate the VAT due to, or from, the relevant tax authority.............................................62.4 Submission of a completed VAT return and any associated payment within the statutorytime limits....................................................................................................................................7TASK 3............................................................................................................................................73.1 Implications and penalties for an organisation resulting from failure to abide by VATregulations...................................................................................................................................73.2 Adjustments and declarations for any errors or omission identified in previous VATperiods.........................................................................................................................................8TASK 4............................................................................................................................................84.1 Providing information of impact of VAT payment may have on an organisation................84.2 Advise to relevant people about changes in VAT legislation which would have an effect ofan organisation............................................................................................................................9CONCLUSION................................................................................................................................9REFERENCES..............................................................................................................................10
INTRODUCTIONIndirect tax is an amount which is charged on purchase or sales of goods and servicesrather than profits or revenues of the organisation. It is collected by a mediator from theinstitutions which are bearing eventual economical encumbrance of taxation. At last a return isfiled by the intermediary to the government. All such types of taxes are flexible (Indirect tax,2019). There are various types of such expenses like central sales, excise duty, securitytransactions, VAT and others. These are paid by the consumers by paying extra amount for aparticular product at the time of purchase. In this project report various aspects are discussedsuch as understanding of VAT regulations and completion of VAT returns accurately and in atimely manner. Detailed information of penalties, adjustments for errors related to VAT and itinformation is also being covered under this assignment.TASK 11.1 Identification of sources of information on VATVAT is an indirect tax which is applied on all the products and services that are bought orsold within a country. It is a consumption taxation which was introduced in year 1973 and thethird largest source of legal bodies to acquire revenues. It is considered as indirect because it isnot paid directly to the government by the consumers. VAT is charged by sellers from customersby adding value of it in the total selling price of a product or service. In UK predeterminedpercentage of this tax is 20% which was increased in year 2011 from 17.5%. It may be chargedon items such as commission, canteen meals sold to staff, gifts, selling assets of a business(Abbott and et.al., 2016). The amount of VAT Payable by a taxable person is calculated bysubtracting inputs used for production of goods and services from cost of products incurred ontheir production. Taxable persons include any legal entity(s) operating as a VAT registeredbusiness. However, VAT is not applicable for all cities, some places are exempted from this tax. Sources of information on VAT can be identified by using the information that ispromptly available from federal government sites and portals. Another source of information isavailable from HM revenue and customs (HMRC) portals that is responsible for tax collectionacross UK. All the relevant information regarding tax or any other issue for paying tax isconsidered by the HMRC and it provide solutions to the tax payers. 1
1.2 Interaction between organisation and relevant government agencyHMRC or HM Revenue and customs is a government department responsible forcollection and payment of taxes in the country from and to the registered VAT businessesrespectively. From registration procedures to the time a taxable person exits or ceases to berecognised as a VAT registered business, HMRC provisions for easier access and administrationof VAT accounts created for organisations and individuals through Making Tax Digital (MTD)program. This program helps easier tax administration making the process of registering,submitting and applying for any kind of returns or grievance (Agell, Englund and Södersten,2016).1.3 VAT Registration requirementsHM Revenue & Customs (HMRC) provides a detailed procedure that is required to befollowed by a taxable person. An organization needs to register for VAT if the VAT taxableturnover exceeds £85,000. VAT Taxable turnover refers to the sum of everything an organisationsells that is not exempted from VAT or total value of all taxable supplies except exempt supplies.Businesses need to register with HMRC for VAT returns Once the organisation registerswith HMRC as a registered business, a VAT number is issued. Registration can be completedeither by filling a form online or offline through an agent which is usually a rare situation. Foroffline registration the organisations may appoint an agent to do it on their behalf. Differentforms are needed to be filled for different types of businesses (Bahl, 2018). For instance, formssuch as VAT1A needs to be filled by distance sellers at the time of registration, VAT1B I is forimporters and VAT1C is required to be filled and submitted if a VAT registered business needsto dispose off their assets.1.4 Information need to be disclosed as business documentation of VAT registered businessesHM Revenue and Customs demands its taxable persons to comply with the properbusiness documentation of their operations at the time of registration. Following informationneeds to be disclosed as business documentation of VAT registered business:National Insurance (NI) numberTax identifier i.e. Unique Taxpayer’s reference (UTR) numberCertificate of incorporation/incorporation detailsBusiness bank accounts detailsInformation on all associated businesses within the last two years2
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