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MichMich Just JoinedRegistered Posts: 4
#1 Yesterday, 12:52
New Member Join Date: Apr 2010
Posts: 1

Unit 35 Help! VAT


Does anyone have any pointers as to what the effect would be on a company if they began to sell items or services ranked as exempt from VAT??

So confused.......

if VAT of £125 was omitted in error from an invoice sent in from a supplier earlier how should the invoice of £125 VAT that has just been sent in be treated when the company comes to prepare the VAT return for the quarter?????



  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071

    1. If you sell exempt supplies, you may not be able to recover all of the input VAT (the VAT you pay on your purchases).

    If the value of Exempt supplies is under a certain % ( I think it's 25%) then you can just calim back VAT on expenses as normal.

    If it's more than the %, then you have to run a partial exemption calculation (the specifics of which you won't need to know for foundation I hope!)

    If you supply exepmt supplies, you must not charge VAT and must state on the invoice that those items/services are exempt.

    2. If they invoiced just £125 of VAT on the invoice, then I'd put it all through as total VAT on the VAT return, i.e. a box 4 entry but not a box 7 as there was no purchase value (the value would have gone on the VAT return from the original invoice that omitted the VAT). You follow the VAT and dates on the invoices you receive from your supplier.
  • JaffasGirlJaffasGirl Trusted Regular Registered Posts: 387
    Not sure if this would ever come up, but was a question that popped into my head lol

    if the product was 0% rated..would you 'charge' VAT on the invoice at 0%?

    or would you just make a note of it somewhere on the invoice?

  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    Yes, you charge VAT at 0%. That's the difference between zero and exempt, you charge VAT on zero rated supplies, it's just at 0%. You don't charge vat on Exempt supplies - because they are exempt.

    You should note on each invoice line what the tax treatment is (e.g. S, Z, E). I don't think there is a set form, but it needs to be clear.

    HMRC have guidelines on the compulsory elements on a VAT invoice.
  • JaffasGirlJaffasGirl Trusted Regular Registered Posts: 387
    Thank you!
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