Chartered Institute of Taxation (CIOT / CTA) VAT and Indirect Taxes Advisory Syllabus

VAT and Indirect Taxes Advisory syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for VAT and Indirect Taxes Advisory in Chartered Institute of Taxation (CIOT / CTA), not a summary of it.

1. 1

   VAT Principles and Liability

   4 topics

   • Scope of VAT and types of supply
     • Standard, reduced, zero-rated and exempt supplies
     • Single versus multiple supplies
   • Input tax recovery and partial exemption
     • Standard method and special methods
     • Capital goods scheme
   • VAT and land and property
     • Option to tax
     • Transfer of a going concern
   • Special schemes and accounting
2. 2

   International VAT and Trade

   4 topics

   • Place of supply of goods and services
     • B2B and B2C general rules
     • Use and enjoyment provisions
   • Imports, exports and reverse charge
     • Postponed import VAT accounting
     • Domestic reverse charge for construction
   • Cross-border digital services and the OSS/IOSS landscape
   • Customs duties and origin rules
3. 3

   Other Indirect Taxes and Duties

   4 topics

   • Stamp duty land tax
     • Residential, non-residential and mixed rates
     • Reliefs and the higher rates for additional dwellings
   • Stamp duty and stamp duty reserve tax
   • Environmental and excise taxes
     • Plastic packaging tax and landfill tax
     • Climate change levy and aggregates levy
   • Insurance premium tax and gambling duties

VAT and Indirect Taxes Advisory flashcards for Chartered Institute of Taxation (CIOT / CTA)

21 of 50 cards from the VAT and Indirect Taxes Advisory deck — real questions with worked answers.

1. What is the basic UK VAT scope test — what must be present for output VAT to be due on a transaction?

   VAT is due where there is (1) a supply of goods or services, (2) made in the UK, (3) by a taxable person, (4) in the course or furtherance of business, and (5) the supply is not exempt. All five conditions must hold.

2. Distinguish the four main VAT liability categories for supplies.

   Standard-rated ($20\%$), reduced-rated ($5\%$, e.g. domestic fuel), zero-rated ($0\%$, e.g. most food, books, children's clothing — taxable, input tax recoverable), and exempt (no output VAT, generally no input tax recovery).

3. What is the key VAT input-tax difference between a zero-rated supply and an exempt supply?

   Both carry no output VAT, but a zero-rated supply is a taxable supply, so the supplier can recover related input tax; an exempt supply is not taxable, so related input tax is generally irrecoverable.

4. State the UK VAT registration threshold and the two tests that trigger compulsory registration.

   Threshold is taxable turnover of £$90{,}000$. Historic test: turnover in the previous 12 months exceeds £$90{,}000$ (register within 30 days of month end, effective 1st of following month). Future test: turnover in the next 30 days alone will exceed £$90{,}000$ (register immediately).

5. What is the deregistration threshold for UK VAT?

   A trader may deregister if expected taxable turnover in the next 12 months will not exceed £$88{,}000$.

6. Define 'input tax' and 'output tax'.

   Output tax is VAT charged by a taxable person on the supplies they make. Input tax is VAT incurred on goods and services purchased for business purposes. VAT payable to HMRC $=$ output tax $-$ recoverable input tax.

7. What two general conditions must be met for input VAT to be recoverable?

   (1) The input must be attributable to taxable (standard, reduced or zero-rated) supplies made by the business, and (2) it must be incurred for business purposes (not blocked, e.g. business entertainment or most cars).

8. Name two common categories of 'blocked' input VAT that cannot be recovered.

   VAT on UK business entertainment, and VAT on the purchase of a car available for private use. (Other examples: certain goods under second-hand margin schemes, non-business expenditure.)

9. In VAT partial exemption, how is input tax classified before applying the recovery method?

   Into three pots: (1) input tax directly attributable to taxable supplies (fully recoverable), (2) input tax directly attributable to exempt supplies (irrecoverable subject to de minimis), and (3) residual/non-attributable input tax (recovered by apportionment).

10. State the standard partial exemption method formula for recovering residual input tax.

    $$\text{Recovery \%} = \frac{\text{Value of taxable supplies}}{\text{Value of total supplies}} \times 100$$ rounded up to the next whole percentage (unless residual input tax exceeds £$400{,}000$/month, then rounded to 2 decimals). Exempt input excludes the value of certain capital items and incidental transactions.

11. State the partial exemption de minimis limits under which all input tax (including exempt-related) is recoverable.

    Exempt input tax is de minimis if total exempt input tax is (a) $\leq$ £$625$ per month on average ($=$ £$7{,}500$ per year) AND (b) $\leq 50\%$ of total input tax. If both conditions are met, the exempt input tax is fully recoverable.

12. What is the VAT capital goods scheme (CGS) and which assets does it cover?

    The CGS adjusts input tax recovery on certain capital assets over time to reflect changes in taxable use. It covers computers/equipment costing $\geq$ £$50{,}000$ (5-year adjustment period) and land/buildings/civil engineering costing $\geq$ £$250{,}000$ (10-year/10-interval adjustment period).

13. What is the general VAT liability of a supply of land and buildings, and the main exception?

    Most supplies of an interest in land are exempt from VAT. Main exceptions: the freehold sale of a 'new' commercial building (under 3 years old) is standard-rated, and the grant of a major interest in a new dwelling by the constructing developer is zero-rated.

14. What is the 'option to tax' (election to waive exemption) in VAT and its main effect?

    An option to tax converts otherwise-exempt supplies of a specific commercial property into standard-rated supplies, allowing the owner to recover related input VAT (e.g. on construction/refurbishment). It generally lasts 20 years and is irrevocable in the first 6 months.

15. Give the VAT liability of (a) construction of a new dwelling and (b) sale of a freehold new commercial building.

    (a) Construction services for a new qualifying dwelling are zero-rated. (b) The first freehold sale (within 3 years of completion) of a new commercial/industrial building is standard-rated; thereafter it becomes exempt unless an option to tax applies.

16. What is a Transfer of a Going Concern (TOGC) and its VAT treatment?

    A TOGC is the sale of a business as a going concern. If conditions are met (business continues same trade, buyer is/becomes VAT registered, and for property the buyer opts to tax and notifies before the tax point), the transfer is outside the scope of VAT — no VAT is charged.

17. Describe the VAT Flat Rate Scheme (FRS) and its eligibility threshold.

    Eligible if taxable turnover (excl. VAT) is expected $\leq$ £$150{,}000$. The business charges VAT normally but pays HMRC a flat percentage of VAT-inclusive turnover and does not reclaim input VAT (except certain capital items $\geq$ £$2{,}000$). 'Limited cost traders' use a $16.5\%$ rate.

18. Describe the VAT Cash Accounting Scheme and its turnover limits.

    Output and input VAT are accounted for when cash is paid/received rather than on invoice date — giving automatic bad debt relief. Available if taxable turnover $\leq$ £$1.35$m to join; must leave when turnover exceeds £$1.6$m.

19. Describe the VAT Annual Accounting Scheme and its turnover limit.

    One VAT return per year with interim instalment payments (monthly or quarterly) based on the prior year's liability, balancing payment with the return. Available if taxable turnover $\leq$ £$1.35$m; leave when over £$1.6$m.

20. State the general (B2B) and general (B2C) place of supply of services rules.

    B2B (to a business): place of supply is where the customer belongs (general rule, reverse charge often applies). B2C (to a consumer): place of supply is where the supplier belongs (general rule). Numerous special rules override these.

21. Give three examples of services subject to special place-of-supply rules overriding the general rule.

    Land-related services (where the land is located); admission to events/services physically performed (where performed); and electronically supplied/digital services to consumers (where the customer belongs/consumes).

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