Your manager has sent you an email, with two attachments, concerning the Eet Ltd group. The attachments consist of extracts from the group’s files and a schedule of information from the group finance director. The email details the work your manager requires you to do. The documents are set out below.

Attachment 1: Eet Ltd group – extracts from the group’s files

Jek Ltd – sale of the Mar building
Jek Ltd purchased the Mar building on 1 June 2012 for £450,000 plus value added tax (VAT) of £90,000. In the year ended 31 March 2013, and in all subsequent years, 72% of this building was used to make taxable supplies and 28% was used to make exempt supplies. The capital goods scheme applies to the Mar building.

Jek Ltd will sell the Mar building during the year ending 31 March 2020 for £700,000.

Email from your manager – dated 4 December 2018

Please carry out the following work in respect of the Eet Ltd group:

(c) Jek Ltd – value added tax (VAT) on the sale of the Mar building

The group finance director is considering whether or not to opt to tax the Mar building. In respect of the two alternatives:

– explain whether or not VAT should be charged on the sale of the building in March 2020;

– calculate the final VAT adjustment (i.e. only the sale adjustment) which will be made under the capital goods scheme.

Tax manager

Required:
Prepare the notes as requested in the email from your manager. The following marks are available:
(c) Jek Ltd – value added tax (VAT) on the sale of the Mar building. (6 marks)