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Indirect Tax on VAT Assignment PDF

   

Added on  2021-01-01

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INDIRECT TAXTable of Contents

INTRODUCTION...........................................................................................................................3TASK 1 ...........................................................................................................................................41.1 Sources of Information on VAT...........................................................................................41.2 Explain how an organization should interact with the relevant government agency............41.3 Explain VAT registration requirements................................................................................51.4 Identify the information that must be included on business documentation of VATregistered businesses...................................................................................................................61.5 Requirements and the frequency of reporting for various VAT schemes.............................61.6 Maintain an up-to-date knowledge of changes to codes of practice, regulation orlegislation....................................................................................................................................7TASK 2............................................................................................................................................72.1 Extract relevant data for a specified data for a specific period from the accounting system......................................................................................................................................................72.2 Calculations of VAT.............................................................................................................82.3 Calculate the VAT due to, or from, the relevant tax authority.............................................92.4 Submit a VAT return and any associated payment within the statutory time limit............10TASK 3 .........................................................................................................................................103.1 Explain the implications and penalties for an organisation resulting from failure to abideby VAT regulations...................................................................................................................103.2 Adjustments and declarations for any errors or omissions identified in previous VATperiods.......................................................................................................................................11TASK 4 .........................................................................................................................................114.1 Impact of VAT payment on organization's cash flow and financial forecasts....................114.2 Advise relevant people of changes in VAT legislation which would have an effect on anorganization's recording systems...............................................................................................12CONCLUSION..............................................................................................................................12................................................................................................................................................12REFERENCES..............................................................................................................................12INTRODUCTIONIndirect taxes are imposed on producers or suppliers by UK government. Under thissystem, the burden of tax can be shifted to another person (consumer). Unlike, direct tax, it is

charged on incomes of households and firms. It is also called “expenditure taxes”. Value AddedTax or VAT is an indirect tax, charged on sale of goods and services in the UK. It is a kind of“consumption tax” due it's being levied on the products that people buy. It is collected bybusiness on behalf of the government, hence called “indirect tax”. In UK, it is the third largest source of government revenue after income tax and National insurance.The report covers, VAT regulations by describing its sources, registration requirements, variousschemes, calculation, penalties for failure or breaching the regulations, adjustments anddeclarations for errors assessed in previous VAT return (Acosta‐Ormaechea and et. al., 2012). TASK 1 1.1 Sources of Information on VATThe business that are dealing in goods and services should know everything about thetaxes that are levied. The necessary information range from registration to rates to calculationsand basis of charging. It becomes imperative to gather and apply complete detail about the VAT,for carrying out the activities smoothly. The best source to obtain information in Value AddedTax Act, 1994 and rules. it contains meaning, definitions, provisions, items covered, criteria forfirms that will be covered by this Act, amendments, penalties for contravention and many more.Further, online guide has been provided by the UK government in order to enable the entities tohave the every possible knowledge about VAT before starting the business or expansion byentering into a new segment of service or goods. 1.2 Explain how an organization should interact with the relevant government agency.VAT is levied and administered by the UK government. It is the ultimate authority forimplementing and changing the provisions of the ACT. All the data from registration to payingthis tax is saved in the database of HM Revenue and Customs (HMRC) department. It hasestablished its departments to assist the taxpayer regarding the payment. Further, taxrepresentatives have been appointed by HMRC who will control VAT regulations applicable onthe firms operating in their assigned areas. This department has introduced digital record keepingsystem for VAT-registered businesses (Overview of digitalization of tax under HMRC (, 2018).The firms can file their return physically by visiting the office of the representative or can alsofile online by accessing the government official site. Further, any query will be resolved by suchofficials for better interaction.

1.3 Explain VAT registration requirements.A business must be registered to avail the benefits of VAT. Every firm, providingservices or dealing in goods must get registered with HMRC, if its VAT taxable turnover is morethan £85,000 (Keen, 2013). On the completion of the process, a registration certificate will beprovided by quoting the VAT number, details about the first return to filed and payment to bemade together with effective date. There are two types of registrations. 1.Compulsory registration- One must register if:if VAT taxable turnover is expected to be more than £85,000 in the next 30-day period.In this case, one must get registered by the end of that 30-day period and the effectivedate will the date firm realised, not when the turnover exceeded the threshold limit. If business had a VAT taxable turnover of more than £85,000 over the last 12 months.The registration has to be done within 30 days of the end of the month when the limitedwent over the specified turnover. Effective date in this case will the first day of thesucceeding month when the limit was exceeded (Alm,2012). Further, a person can register voluntarily even if the turnover is less than abovementioned limit, provided the goods that are being sold in not “exempted”. A firm can getregistered online, an account will be created. Also, registration can be done through post using: Form VAT1 if : 1.for registration exception2.Agricultural Flat Rate Scheme3.Registering business units or divisions of a body corporate under separate VAT numbers. There are separate forms available to be sent through post other than the businessesmentioned above. These are: 1.VAT1A for EU business distance selling to UK2.VAT2B importing goods having value of more than £85,000 from another EU state. 3.VAT1C on disposing of assets on which 8th or 13th Directive refunds have been claimed.No registration is required in case, a firm deals only in those goods or services that areexempt from VAT, provided, the goods worth more than £85,000 must be bought from EU-VATregistered suppliers only. Also, one may have to get registered for VAT if he take over a VATregistered business.

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