Test your understanding
(1). Jerome is a decorator. On 20 July 2020, he started a contract to decorate an office building, completing the contract on 23 August 2020. An invoice was issued for the full amount of the contract on 3 September 2020 and this was paid by the client on 10 November 2020.
What is the tax point (date of supply) for Jerome’s decorating contract?
A 20 July 2020
B 23 August 2020
C 3 September 2020
D 10 November 2020
(2). Ming prepares VAT returns for the quarters ended 31 March, 30 June, 30 September and 31 December. On 10 May 2020, 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 2020. These figures are exclusive of VAT.
What entries will be made on Ming’s VAT returns in respect of these goods?
A Output VAT of £1,600 for the quarter ended 30 September 2020
B Input VAT of £1,000 for the quarter ended 30 June 2020, and output VAT of £1,600 for the quarter ended 30 September 2020
C Input VAT and output VAT of £1,000 for the quarter ended 30 June 2020, and output VAT of £1,600 for the quarter ended 30 September 2020
D Input VAT of £1,000 and output VAT of £1,600 for the quarter ended 30 September 2020
(3). In which circumstances will a VAT registered business be required to issue a VAT invoice?
A When a standard rated supply is made to any customer
B When any type of supply is made to any customer
C When a standard rated supply is made to a VAT registered customer
D 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 2020. During the period 1 January to 30 April 2020, her taxable supplies were £9,000 per month; during the period 1 May to 31 August 2020, they were £10,500 per month; and during the period 1 September to 31 December 2020, they were £12,000 per month.
Alice is now in the process of completing her VAT return for the quarter ended 31 March 2021. 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).
(4). From what date was Alice required to be registered for VAT?
A 1 November 2020
B 1 October 2020
C 1 December 2020
D 1 September 2020
(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
D 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 2021?
(7). By what date will Alice’s VAT return for the quarter ended 31 March 2021 have to be submitted to HMRC?
A 30 April 2021
B 7 May 2021
C 7 April 2021
D 31 March 2021
(8). Which VAT scheme would provide Alice with automatic relief for impairment losses?
A The cash accounting scheme
B The flat rate scheme
C The annual accounting scheme
D None of the schemes