Value added tax

Test your understanding: answers

(1). C  The basic tax point for services is the date that they are completed (23 August 2018), but this is replaced by the invoice date (3 September 2018) where the invoice is issued within 14 days of the basic tax point.

(2). 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.

(3). C  A VAT registered business must issue a VAT invoice when it makes a standard rated supply to a VAT registered customer.

(4). A  The registration limit of £85,000 was exceeded during September 2018 ((9,000 x 4) + (10,500 x 4) + 12,000 = £90,000), so Alice would have been required to have registered for VAT from 1 November 2018.

(5). 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.

(6). 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 to HM Revenue and customs.

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

(8). A  Use of the cash accounting scheme results in automatic relief for impairment losses.