Baker Watkin chartered accountants and chartered tax adviser
 
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Baker Watkin

Middlesex House

Rutherford Close

Stevenage SG1 2EF

t: 01438 750555

e: enquiries@bakerwatkin.co.uk

 

Output Tax Issues – 3 May 2011

During the course of preparing your accounts, we do not, unless otherwise instructed, specifically check your VAT returns. In particular we do not check the VAT treatment of supplies made between positive and zero rates, and exempt supplies.

The checklist set out below relating to Output tax issues may be of use to you where you feel that your VAT records may have some shortcomings.

Output Tax issues

  • Do you have any other forms of income with the same legal entity that should be declared as far as VAT is concerned – it is the legal entity that is registered for VAT (eg sole trader, partnership), not the business?
  • Has the VAT liability of all income sources been correctly established? If income is zero-rated, exempt or subject to the 5% rate of VAT, is the legal basis for this decision correct?
  • Does the business supply any services to overseas customers? If so, have the place of supply rules been considered - particularly important after major changes were introduced on 1 January 2010.
  • Have any fixed assets been sold – has output tax been accounted for where appropriate?
  • Inter-company charges, for eg management services or goods supplied, will be subject to VAT unless a group registration is in place. Has output tax been charged on such transactions and input tax claimed by the recipient (subject to normal rules)?
  • Does the business sell goods to overseas customers – if so, has proof of shipment been retained as evidence of export? This is very important in the event of a future VAT review by HMRC.
  • Are the tax point rules being correctly applied – is output tax being accounted for on advance payments, is a sales invoice being raised within 14 days of a supply taking place?
  • If you have a connected business that is not VAT registered, ensure there is not a potential problem with the business splitting rules, ie proper recharging, separate bank accounts, invoicing, buying et.

If you require further advice on this or other accounting and tax related matters please contact Andrew Watkin at awatkin@bakerwatkin.co.uk or call 01438 750555.

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The information contained in this briefing is based on information available as at 3 May 2011 and may be subject to amendment. It is written as a general guide and is not a substitute for professional advice. You are strongly recommended to obtain specific professional advice from us before you take any action. No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this briefing can be accepted by Baker Watkin or the partners.