Out of Scope or Exempt? Join the office debate!
Raging Pineapples
Registered Posts: 110 Dedicated contributor 🦉
So the other day we got into a debate in the office, and I thought I'd see what you all think:
How would you actually DEFINE transactions that are Out of the Scope of VAT in comparison to those that are simply Exempt?
I had always learned it this way:
NOT IN SCOPE: VAT is a sales tax, but these transactions are not sales or services of any kind and therefore cannot possibly logically, not even feasibly, concievably or remotely ever ever ever have anything to do with VAT.
EXEMPT: Goods and Services which The Revenue has decided for some greatly wise reason known only to themselves and the rest of the EU not to charge VAT on...?
The MD was trying to explain it in a far more complicated way than that, so I could be wrong. How are vat codes 6 and 7 defined in YOUR little world!?
How would you actually DEFINE transactions that are Out of the Scope of VAT in comparison to those that are simply Exempt?
I had always learned it this way:
NOT IN SCOPE: VAT is a sales tax, but these transactions are not sales or services of any kind and therefore cannot possibly logically, not even feasibly, concievably or remotely ever ever ever have anything to do with VAT.
EXEMPT: Goods and Services which The Revenue has decided for some greatly wise reason known only to themselves and the rest of the EU not to charge VAT on...?
The MD was trying to explain it in a far more complicated way than that, so I could be wrong. How are vat codes 6 and 7 defined in YOUR little world!?
0
Comments
-
Boy i need coffee before i even contemplate answering this thread0
-
I have no idea.
While you're at it though, could you work out the logic behind:
Zero-rated: Things which are not exempt, but attract VAT at 0%, eg books and children's clothes.0 -
I like this thread already! I did some research and I have an answer for you, so I've learned something!!
(puts on boff cap)
Exemption is deeper than zero rating and blocks out whole families of goods and services that would otherwise be subject to VAT, but have been given the all-clear by HMRC. However, conditions are imposed and businesses cannot reclaim VAT on any costs incurred in their providing of Exempt goods or services. (if they trade in both Exempt and Non-Exempt services, they have to apportion it I believe, for the proportion of their Input VAT that relates to Non-Exempt outputs).
A firm producing Zero-rated or Reduced-rated goods and services may still reclaim the VAT back as these items do still suffer VAT, but of course at 0% as you said.
So it seems like zero-rating is a tax-break for certain kinds of goods and services, whereas exemption is not so well-meaning.0
Categories
- All Categories
- 1.2K Books to buy and sell
- 2.3K General discussion
- 12.5K For AAT students
- 318 NEW! Qualifications 2022
- 161 General Qualifications 2022 discussion
- 11 AAT Level 2 Certificate in Accounting
- 56 AAT Level 3 Diploma in Accounting
- 87 AAT Level 4 Diploma in Professional Accounting
- 8.8K For accounting professionals
- 23 coronavirus (Covid-19)
- 272 VAT
- 92 Software
- 273 Tax
- 135 Bookkeeping
- 7.2K General accounting discussion
- 200 AAT member discussion
- 3.8K For everyone
- 38 AAT news and announcements
- 345 Feedback for AAT
- 2.8K Chat and off-topic discussion
- 582 Job postings
- 16 Who can benefit from AAT?
- 36 Where can AAT take me?
- 42 Getting started with AAT
- 26 Finding an AAT training provider
- 48 Distance learning and other ways to study AAT
- 25 Apprenticeships
- 66 AAT membership