Value added tax

Test your understanding

(1). Jerome is a decorator. On 20 July 2019, he started a contract to decorate an office building, completing the contract on 23 August 2019. An invoice was issued for the full amount of the contract on 3 September 2019 and this was paid by the client on 10 November 2019.

What is the tax point (date of supply) for Jerome’s decorating contract?

20 July 2019
23 August 2019
3 September 2019
10 November 2019


(2).
 Ming prepares VAT returns for the quarters ended 31 March, 30 June, 30 September and 31 December. On 10 May 2019, she purchased standard rated goods costing £5,000 from a supplier situated outside the European Union. The goods were sold for £8,000 on 2 August 2019. These figures are exclusive of VAT.

What entries will be made on Ming’s VAT returns in respect of these goods?

Output VAT of £1,600 for the quarter ended 30 September 2019
Input VAT of £1,000 for the quarter ended 30 June 2019, and output VAT of £1,600 for the quarter ended 30 September 2019
Input VAT and output VAT of £1,000 for the quarter ended 30 June 2019, and output VAT of £1,600 for the quarter ended 30 September 2019
D Input VAT of £1,000 and output VAT of £1,600 for the quarter ended 30 September 2019


(3). In which circumstances will a VAT registered business be required to issue a VAT invoice?

When a standard rated supply is made to any customer
When any type of supply is made to any customer
C When a standard rated supply is made to a VAT registered customer
When any type of supply is made to a VAT registered customer

 

The following scenario relates to questions 4–8.

Alice commenced trading on 1 January 2019. During the period 1 January to 30 April 2019, her taxable supplies were £9,000 per month; during the period 1 May to 31 August 2019, they were £10,500 per month; and during the period 1 September to 31 December 2019, they were £12,000 per month.

Alice is now in the process of completing her VAT return for the quarter ended 31 March 2020. During the quarter, sales invoices totaling £66,900 (exclusive of VAT) were issued in respect of standard rated sales, whilst standard rated expenses amounted to £19,200 (inclusive of VAT).

Required:


(4). From what date was Alice required to be registered for VAT?

1 November 2019
1 October 2019
1 December 2019
1 September 2019


(5).
 Which one of the following is not a condition for the recovery of pre-registration input VAT incurred in respect of goods?

A The goods must have been acquired within four years of registration
B The goods must have been acquired for business purposes
C The goods must not have been sold or consumed prior to registration
The goods must have been paid for prior to registration


(6). How much VAT will Alice have to pay to HMRC in respect of the quarter ended 31 March 2020?

£9,540
£10,180
£7,950
£7,310


(7). By what date will Alice’s VAT return for the quarter ended 31 March 2020 have to be submitted to HMRC?

30 April 2020
7 May 2020
7 April 2020
31 March 2020


(8). Which VAT scheme would provide Alice with automatic relief for impairment losses?

The cash accounting scheme
The flat rate scheme
C The annual accounting scheme
None of the schemes


Answers