ACCA ATX ^UK Syllabus A6. Value Added Tax - Treatment of imports to the UK exports from the UK - Past Papers ^{10 / 10}

Email from Ms Driver– dated 7 June 2018

Regards
Ms Driver

(b) Wagon Ltd – value added tax (VAT).             (5 marks)

Meg is an unincorporated sole trader. She requires advice on the value added tax (VAT) implications of purchasing supplies from an overseas supplier.

MT Travel – VAT:
– MT Travel is registered for the purposes of VAT.
– MT Travel currently buys standard-rated marketing services from a UK supplier, who is VAT registered.
– MT Travel can buy the same services from a supplier located in an overseas country, which is not in the EU, where the rate of VAT is 12%.

Required:
(c) Explain the value added tax (VAT) effect of MT Travel purchasing the services from the overseas supplier, rather than the UK supplier. (4 marks)

Your manager has had a telephone conversation with Burt, the Group Finance Director of the Epon Ltd group of companies. Extracts from both a memorandum and an email from your manager are set out below.

Extract from a memorandum from your manager

On Thursday 6 June I spoke to Burt, the Group Finance Director of Epon Ltd. He is coming to the office on Monday to appoint us as tax advisers to the group, and possibly to the individual directors, and to discuss the group’s affairs.

The Epon Ltd group
Epon Ltd is owned by a large number of unrelated individuals. Epon Ltd owns 100% of the ordinary share capital of Wahzah Ltd, Yoko Ltd and NewCo Ltd. All four companies are UK resident and prepare accounts to 30 June each year.

The purchase of equipment from the country of Candara
A new supplier of equipment for the fitness clubs has been identified in Candara. Wahzah Ltd intends to purchase equipment from this supplier in July 2013. The country of Candara is not a member of the European Union.

Extract from an email from your manager

Please prepare a memorandum for the client file that addresses the following issues:

(b) The purchase of equipment from the country of Candara
Explain the value added tax (VAT) implications for Wahzah Ltd of the purchase of the equipment from the country of Candara.

Tax manager

Required:
Prepare the memorandum requested in the email from your manager. The following marks are available.
(b) The purchase of equipment from the country of Candara. (2 marks)