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Who is liable to pay output tax?
The person making the supply when a taxable person makes a taxable supply (VATA 1994 s4(1))
Is a gratuitous supply of services a supply for VAT purposes?
Is a solicitor supplying legal services standard rated, zero rated or exempt?
Is a firm of solicitors a taxable person?
Because they are almost always required to be registered under the VATA 1994
What does a solicitor charging VAT have to charge VAT on?
- - His supplies of legal services AND
- - Other supplies made in the course of business
if a price or fee is agreed is this deemed to be VAT inclusive?
Yes unless expressly stated otherwise
When does a tax invoice have to be made?
What must it state?
Within 30 days after the time of supply.
- It must state:
- The identifying number
- The date of supply
- The supplier's na,e address and VAT registration number
- Name and address of the person to whom the supply is made
- The type of supply
- Description of the goods or services supplies
- Quantity og goods/extent of services
- Total amount payable excluding VAT
- Rate of cash discount
- Rate and amount of tax charged
What must a solicitor charge VAT on?
What does he not have to pay VAT on subject to 7 conditions?
- His supply of services and items which do not qualify as disbursements (telephone charges, postagw, photocopying, travelling expenses incurred by the solicitor - normally all these things will be included in profit costs, if separate remember to charge VAT on all of them).
- - Disbursements (e.g. court fees) as long as:
- The solicitor acted as agent for his client when paying the third party
- The client actually received and used the goods/services (i.e. not telephone bills, postage etc)
- Client was responsible for paying the third party
- The client authorised the solicitor to make payment on his behalf
- The client knew that the goods or services would be provided by a third party
- The solicitor's outl;ay must be separately itemised when invoicing the client
- The solicitor must recover the exact amount paid to the third party
What are the two methods of passing on the VAT element in a disbursement including a VAT element?
When is each used?
1) Agency method. Where the original supplier addressed the invoice to the client
2) Principal method. Where the original supplier address the invoice to the solicitor
How does the "agency" method work?
- - The solicitor hands over the money on behalf of the client. The payment can be made from the client bank account if there is sufficient money in the client account. If not, it must be made from the office account.
- IF THE INVOICE IS MADE TO THE CLIENT THEN CLIENT MONEY CAN BE USED TO PAY IT
The solicitor does not separate the fee and VAT in the firm's accounting records, but instead records the total paid. The solicitor must if ask send the supplier's tax invoice to the clinet. if the client is registered for VAT and the supply is in the course of furtherance of a business, the client will use the invoice to recover input tax.
How does the principal method work?
it is treated as made to the solicitor in the first instance. The solicitor can claim the supply as an input tax. The solicitor must use office money to pay the supplier's fees.
IF THE INVOICE IS ADDRESSED TO THE FIRM THEN OFFICE MONEY MUST BE USED TO PAY THE FEES.
The solicitor will charge output tax on the firm's professional charges and on the disbursement. If the client is entitled to a tax invoice te solicitor will provide one invoice to cover both the disbursement and the solicitor's own professional charge.
What is the special concession for counsel fees addressed to the solicitor?
The solicitor can alter the fee note so that is is addressed to the clinet. It is then treated on the agency basis. The solicitor must give the fee note to the client so that the client can reclaim the input tax.