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Indirect taxataion : Assignment

   

Added on  2021-01-01

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Indirect tax

Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................11.1 Sources of VAT information.................................................................................................11.2 The way in which an organisation should interact with the relevant government agency....21.3 VAT registration requirements..............................................................................................21.4 Information that must be included on business documents of VAT registered businesses...31.5 Requirements and frequency of reporting for 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 for an organisation resulting from failure to abide by VATregulations....................................................................................................................................83.2 Adjustments and declarations for any errors or omission identified in previous VAT period......................................................................................................................................................9TASK 4............................................................................................................................................94.1 Inform managers of the impact that the VAT payment may have on an organisation’s cashflow and financial forecasts.........................................................................................................94.2 Advise for changes in VAT legislation which would have an effect on an organisation’srecording systems.......................................................................................................................10CONCLUSION..............................................................................................................................11REFERENCES..............................................................................................................................12

INTRODUCTIONIndirect tax is one of the major source of revenue for government in UK. Indirect Taxrefers to Indirect tax refers to tax on on consumable products not directly levied on income orproperty such as excise duties, custom duties, value added tax etc. Ultimate consumer of goodsor services bears burden of indirect tax. Indirect tax leads to an significant increase in the price ofgoods and products for the consumers (Adema, Fron and Ladaique, 2014). In all indirect taxesVAT is most important due to various implications and procedures. In UK, value added tax islargest source of government revenue among all indirect taxes. In UK, VAT is paid by retailers,whole-sellers or other intermediaries to government but consumers are ultimate bearer of tax.This report exhibits a complete understanding of VAT while covering various aspects likesources of information under VAT, registration requirements, information required for businessdocumentation and other VAT related compliances. In this report all regulations concerned withVAT, accurate and timely VAT return , VAT implications and penalties and communication ofVAT information is discussed. TASK 11.1 Sources of VAT informationVAT is mainly associated with goods and consumable products. VAT is levied on aproduct as the value is added at different stages of the supply chain, from production to retailsale. For intermediaries like whole-sellers, retailers and other relevant intermediaries, sources ofinformation for VAT calculation are purchase register, sales registers, credit notes, debit notes,inventory registers and other manual register related with selling and purchasing activities. Incase of sales return a credit note is used which helps organisation to adjust VAT input and outputand also a Debit note is used for purchase return (Bargain and et.al., 2015). As a good practice inorder to classify and mange value added tax for various products, an inventory register ismaintained by business organisations. Some entity for simplification of process of VATcalculation maintains a memorandum VAT register in which input credits and input creditsavailed are recorded by entities which also helps to avoid any error or difficulties. Therefore inorder to calculate VAT amount payable, consideration of purchase register, sales registers, creditnotes, debit notes, inventory registers and other manual register related with selling andpurchasing activities are necessary. All of these are major sources on VAT information.

1.2 The way in which an organisation should interact with the relevant government agencyFor proper compliance of rules and regulations, an regulatory authority some timesknown as government agency, is established by government for particular field and such relevantgovernment agency ensures proper compliance of rules and regulations (Duclos and Makdissi,2014). Under UK's tax regulatory system HMRC act as government agency which regulates thecompliance of indirect taxes. HMRC act as intermediary between government and businessorganisations. Beside HMRC there are many councils and units which acts as intermediaries.These agencies provides various online and offline services to taxpayers and also provides someexperts to solve difficulties related with indirect taxes. 1.3 VAT registration requirementsIn UK registration of VAT registration is compulsory for organisations having totalturnover exceeding £85,000 however an organisation can register voluntarily if turnover is lessthan above threshold limit. In case of distance-selling this limit is £70000. The turnovermentioned in threshold is VAT taxable turnover that incudes total amount of products or goodssold which is not exempt under VAT (Tagkalakis, 2014). Here Distance selling refers to sellingof goods by registered business of one European Union country sells goods to other country inEuropean Union. Following are the major documents required for VAT registration, as follows -Relevant documents related with incorporation such as Certificate of incorporation, Firmregistration certificate.National Insurance (NI) numberSpecific Tax identifier code i.e. Unique Taxpayer's reference (UTR) numberDetails related to Business banksInformation of associated businesses within last two years After registration of business under VAT, a certificate indicating unique VATregistration is provided to business organisation. For Companies, doing business within UK butnot having any registered office in UK; registration under VAT is necessary. Insurance andeducation business are not required to registered under VAT because such business sell goods orservices that are exempt from VAT.

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