An introduction to Indirect Tax
This Advanced level unit is about indirect tax: specifically, the tax that is referred to in the UK and throughout this unit as value added tax (VAT). The unit is designed to develop students’ skills in preparing and submitting returns to the relevant tax authority in situations where the transactions that have to be included are relatively routine. However, some non-routine issues are also included in this unit.
This unit provides students with the knowledge and skills that they need to keep their employers and clients compliant with the laws and practices that apply to the indirect taxation of sales and purchases. The content is designed to ensure that students can perform these tasks relatively unsupervised, particularly in terms of routine and some non-routine VAT tasks. However, it is expected that the student will still require some management for more involved and intensive VAT transactions. It is important that the student understands and applies the VAT rules from an ethical point of view. All VAT work must be carried out with integrity, objectivity and a high degree of professional competence. There must be due care with regard to confidentiality about any personal data being processed and, from a business protection aspect, with the correct approach to professional behaviour.
Students will learn about VAT legislation and the importance of maintaining their technical knowledge through monitoring updates. Students must be taught how to complete VAT returns accurately and must understand the implications of failing to do so. Inaccuracy and omission, late submission of returns and late payment or non payment of VAT need to be understood in terms of the sanctions and penalties that are available to the relevant tax authority.In particular, students will learn how to calculate the VAT value correctly in different circumstances, verify the calculations of the submitted return and correctly use an accounting system to extract relevant data for the return.
The VAT registration and deregistration rules are important aspects of learning at this level, and this includes the need to monitor sales closely to avoid breaching regulations. The existence and basic terms of special VAT schemes are also important.
Students will learn about how to deal with errors made in previous VAT returns and how and when these errors are corrected. They will also learn about communicating VAT matters to relevant individuals and organisations, including the special rules that apply when goods and services are imported into and exported out of the UK and the European Union (EU).
Indirect Tax is a mandatory unit. It links with Advanced Bookkeeping, Final Accounts Preparation and Management Accounting: Costing as core subjects, and with Spreadsheets for Accounting and Ethics for Accountants to create the Advanced Diploma in Accounting.
Learning outcomes for Indirect Tax
1. Understand and apply VAT legislation requirements
2. Accurately complete VAT returns and submit them in a timely manner
3. Understand the implications for the business of errors, omissions and late filing and payment
4. Report VAT-related information within the organisation in accordance with regulatory an organisational requirement
Find our more about our AAT level 3 qualification at FI.