9 About Tax Requirements

This chapter contains these topics:

• Section 9.1, "Overview to Tax Requirements,"

• Section 9.2, "About Value Added Tax (VAT)."

9.1 Overview to Tax Requirements

The United Kingdom is part of the European Union (EU), which observes the Single European Act of 1987. The Single European Act is an agreement that opens the markets to an area without internal frontiers (boundaries), in which free movement of goods, persons, services, and capital is assured in accordance with the provisions of the Treaty of Rome.

Although day-to-day business activities in the United Kingdom are the same as those for businesses in countries that are not EU members, businesses in the United Kingdom must adhere to EU requirements. For example, to help monitor the trade among members of the EU, businesses that exceed the limit of intra-union trade must submit the following reports to the customs authorities:

• EU Sales Listing

• Intrastat Report

There are also significant differences regarding the specifics of how value added tax is handled.

J.D. Edwards solutions for tax requirements in the United Kingdom include the following tasks:

• Entering journal entries with tax

• Printing the EU Sales Listing

• Working with Intrastat requirements

• Printing value added tax (VAT) reports

Caution:

For tax processing and reporting in the United Kingdom, you must set up your system to meet specific UK requirements. For more information, review the Setup Requirements section of this guide.

9.2 About Value Added Tax (VAT)

Value added tax, or VAT, is a noncumulative tax that tax authorities in the United Kingdom impose at each stage of the production and distribution cycle. VAT is a tax on consumer expenditure.

If you work with VAT, you should understand the following terminology and principles:

Term	Description
Output VAT	Suppliers of goods and services must add VAT to their net prices. They must record output VAT for goods on the date that they issue invoices and for services on the date that they receive payment.
Input VAT	Input VAT is paid by the purchaser of goods and services to the supplier. If the purchaser is subject to VAT of sales (output VAT), they can offset the input VAT they owe against any output VAT that they owe. The purchaser can recover input VAT by offsetting it against output VAT. When input VAT exceeds output VAT, the purchaser can obtain a cash refund.
Nonrecoverable input VAT	Input VAT cannot be recovered on: Goods and services that are not necessary for running the business Expenses that are related to business entertainment Transport of persons Oil-based fuels and lubricants that are transformed and then resold Goods that are provided free of charge or at a substantially reduced price Purchase of cars Services related to goods that are normally excluded from the right of recovery
VAT returns	If tax is payable, businesses must complete VAT returns on a quarterly basis to HM Customs and Excise. You must pay any excess output VAT over input VAT at the time of filing.
VAT exemptions	Certain types of supplies are exempt from VAT. Businesses can obtain a list of these items from the local tax office.