10 Questions
What is the consequence for a business that solely makes exempt supplies in terms of claiming input VAT back?
The business can't register for VAT and therefore can't claim any input VAT back.
What term is used for businesses that sell a combination of taxable and exempt supplies?
Partially exempt businesses
In the context of input VAT reclaims, what does the 'de minimis' amount refer to?
The threshold beyond which exempt input VAT cannot be reclaimed in full.
For a partially exempt business, what happens if the amount of exempt input VAT is below the 'de minimis' amount?
The exempt input VAT can be reclaimed in full.
Which of the following statements about partially exempt businesses is true?
'De minimis' ensures that some exempt input VAT can still be reclaimed if below a certain threshold.
What is the consequence for a business that solely makes exempt supplies in terms of claiming input VAT back?
The business cannot register for VAT and therefore cannot claim any input VAT back
What is the criteria for exempt input VAT to be reclaimed in full for partially exempt businesses?
It must be less than £625 per month on average
What happens when the amount of exempt input VAT exceeds the 'de minimis' amount for partially exempt businesses?
Exempt input VAT cannot be reclaimed
What is the significance of the 'de minimis' amount for partially exempt businesses?
It establishes how much of the exempt input VAT can be reclaimed in full
Which type of businesses are most impacted by the rules regarding claiming back input VAT?
Businesses that sell a mix of taxable and exempt supplies
Study Notes
VAT Registration and Exempt Supplies
- A business making only exempt supplies cannot register for VAT and therefore cannot claim back input VAT, resulting in an additional cost.
- This typically affects charities and education providers.
Partially Exempt Businesses
- A partially exempt business sells both taxable and exempt supplies.
- The input VAT on purchases relating to exempt supplies is considered exempt input VAT.
De Minimis Rule
- If the exempt input VAT is below the 'de minimis' amount, it can be reclaimed in full.
- The 'de minimis' amount is:
- Less than £625 per month (on average)
- Less than half of the total input VAT claimed
- If the exempt input VAT exceeds the 'de minimis' amount, it cannot be reclaimed.
Test your knowledge on VAT registration and input VAT rules for businesses, including the impact of making exempt supplies and the concept of partially exempt businesses. Learn about the additional costs faced by businesses that only make exempt supplies and cannot claim input VAT back.
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