Value added tax

Test your understanding: answers

(1). B Output VAT is £13,380 (66,900 x 20%) and input VAT is £3,200 (19,200 x 20/120), so VAT of £10,180 (13,380 – 3,200) is payable.

(2). A The registration limit of £81,000 was exceeded during January 2015 ((9,000 x 4) + (10,500 x 4) + 12,000 = 90,000), so Alice will be required to register for VAT from 1 March 2015.

(3). D Pre-registration input VAT in respect of goods is recoverable if the goods were not acquired more than four years prior to registration, were not sold or consumed prior to registration, and were acquired for business purposes.

(4). C The basic tax point for services is the date that they are completed (23 August 2014), but this is replaced by the invoice date (3 September 2014) where the invoice is issued within 14 days of the basic tax point.

(5). B VAT returns have to be filed online within one month and seven days of the end of the relevant quarter.

(6). B VAT has to be paid at the time of importation. This VAT can then be reclaimed as input VAT on the VAT return for the period during which the goods were imported.

(7). C The cash accounting scheme enables a business to account for VAT on a cash basis, resulting in automatic relief for impairment losses.