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Sample Assignment on Indirect Tax (doc)

   

Added on  2020-12-18

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INDIRECT TAX

TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1MAIN BODY...................................................................................................................................11.1 Identification of sources of information on VAT.............................................................11.2 Explanation on interaction of organisations to relevant government agency...................21.3 Explanation of VAT registration requirements................................................................21.4 Information which needs to be included on business documentation of VAT registrationbusinesses...............................................................................................................................31.5 Explanation on the requirements and frequency of reporting for these VAT schemes:. .41.6 Knowledge of changes to codes of practice, regulation or legislation.............................42.1 Relevant data for a specific period from accounting system............................................52.2 Calculation of relevant inputs and outputs.......................................................................52.3 Calculation of VAT due of relevant tax authority............................................................62.4 Submission of VAT return...............................................................................................73.1 Explanation on the implications and penalties for organisation resulting from failure toabide by VAT regulations......................................................................................................83.2 Adjustments and declaration for any type of errors or omissions which identified inprevious VAT periods............................................................................................................84.1 Impact of VAT payment on organisation's cash flow and financial forecasts.................94.2 Impact of changes in VAT legislation which would have an effect on an organisation'srecording systems.................................................................................................................10CONCLUSION..............................................................................................................................11REFERENCES..............................................................................................................................13APPENDIX....................................................................................................................................15

INTRODUCTIONIndirect Tax is the type of tax which is collected by one entity usually by producer orretailer and paid to government. This type of tax passed on to consumers in the form of goodsand services. The following assessment will develop to provide information on one type ofindirect tax that is VAT. Its regulations and code of practises will be explained in this report.Further, in this report VAT penalties and impact of VAT payment on organisation will also bediscussed. MAIN BODY1.1 Identification of sources of information on VATValue added tax is the type of indirect tax which is based on the value of goods andservices at each stage of production (Ghodsi and Webster, 2018). Germany and France are thefirst two countries which have implemented VAT in the world. Very first, this tax was initiallydirected at large businesses and then extended with the passage of time in all the businesssectors. In some countries it is also known as type of goods and services which levied on eachstage of production and distribution. Starting from raw materials it is charged up to final stage ofpurchases. It is commonly expressed in terms of percentage of total cost. For example: let the cost ofproduct is £100 and percentage of VAT is 15%, then consumer have to pay total cost of productas £115 to merchant. Then merchant will keep amount of £100 and pay £15 to government.There are main two methods of calculating VAT tax that is the credit invoice or invoice-based1Illustration 1: supply chain of VAT( source: What are some examples of value-added tax, 2018)

method. Credit-invoice is the method where customers are already informed on the VATtransaction and then sales transaction are taxed. In return, business may received a credit oninput material and services (Wales and et.al., 2018). 1.2 Explanation on interaction of organisations to relevant government agencyVAT is known as one of the key consideration for every size of business in UK. If it is anew established organisation, every type of business sector needs to remit tax to governmentagency. Amount which is charged to organisation as VAT is determined by value of goods andservices according to stages of productions. Standard rate of VAT in UK in 20% but there aresome items which is exempted from VAT tax that is property and financial transactions.However, organisation which has turnover greater than £85000 in 12 months period areobliged to register for VAT. If supplier buys goods of more than £85000, then they also need toregister themselves. Other than this, companies which are fulfilling following three conditionsmust also have to register in VAT (Liu and Lockwood, 2016).If an impression is given by entity regarding their large business and it is not then alsoorganisation have to register themselves.For building trust of company.If money spend more on VAT than also organisation have to register.Once company is registered for VAT regulations, then they are obliged to add VAT in their costof goods and services. Companies also need to display VAT number on receipts and invoices.Organisations also have to complete their VAT return once in three months as per the accountingperiod. 1.3 Explanation of VAT registration requirementsThe compulsory registration of threshold limit in UK for VAT is £83000. Limit forregistration commencement for distance selling is £70000 (How to register for VAT in the UK,2019). This threshold limit was based on taxable turnover of VAT. Further, registration is alsorequired if goods have been received from EU which is of more than £83000. Any type ofbusiness which is engaged in selling types of goods and services which are exempted bygovernment did not have to register themselves for VAT. Distance selling goods will take place when a type of business which have registered themselvesfor VAT in one EU country but they are selling goods to another EU country. Such type ofbusinesses did not have to registered themselves of VAT. Companies which do not have any2

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