ACCA TX ^UK Syllabus F. Value Added Tax - VAT Registration - Compulsory and Voluntary - Past Papers ^{1 / 3}

Alisa commenced trading on 1 January 2015. Her sales since commencement have been as follows:

January to April 2015                  £7,500 per month
May to August 2015                    £10,000 per month
September to December 2015    £13,500 per month

The above figures are stated exclusive of value added tax (VAT). Alisa only supplies services, and these are all standard rated for VAT purposes. Alisa notified her liability to compulsorily register for VAT by the appropriate deadline.

For each of the eight months prior to the date on which she registered for VAT, Alisa paid £240 per month (inclusive of VAT) for website design services and £180 per month (exclusive of VAT) for advertising. Both of these supplies are standard rated for VAT purposes and relate to Alisa’s business activity after the date from when she registered for VAT.

After registering for VAT, Alisa purchased a motor car on 1 January 2016. The motor car is used 60% for business mileage.

During the quarter ended 31 March 2016, Alisa spent £456 on repairs to the motor car and £624 on fuel for both her business and private mileage. The relevant quarterly scale charge is £294. All of these figures are inclusive of VAT.

All of Alisa’s customers are registered for VAT, so she appreciates that she has to issue VAT invoices when services are supplied.

From what date would Alisa have been required to be compulsorily registered for VAT and therefore have had to charge output VAT on her supplies of services?

A 30 September 2015
B 1 November 2015
C 1 October 2015
D 30 October 2015

On 1 November 2014, the company signed a contract valued at £86,000 for completion during November 2014.

All of the above figures are stated exclusive of value added tax (VAT). Smart Ltd only supplies services and all of the company’s supplies are standard rated.

Smart Ltd allows its customers 60 days credit when paying for services, and it is concerned that some customers will default on the payment of their debts. The company pays its purchase invoices as soon as they are received.

Smart Ltd does not use either the VAT cash accounting scheme or the annual accounting scheme.

Required:
(a) State, giving reasons, the date from which Smart Ltd was required to register for value added tax (VAT), and by when it was required to notify HM Revenue and Customs (HMRC) of the registration. (3 marks)

The following tax rates and limits are to be used in answering this question:

These figures are stated exclusive of value added tax (VAT). Richard’s sales are all standard rated.

As a trainee Chartered Certified Accountant you have advised Richard in writing that he should be registered for VAT, but he has refused to register because he thinks his net profit is insufficient to cover the additional cost which would be incurred.

Required:
(i) Explain from what date Richard Feast was required to be compulsorily registered for value added tax (VAT) and the VAT implications of continuing to trade after this date without registering.

Note: You are not expected to explain the VAT penalties arising from late VAT registration. (4 marks)

The following tax rate and limits are to be used in answering the questions:

On 6 April 2011 Flick Pick, aged 23, commenced employment with 3D Ltd as a film critic. On 1 January 2012 she commenced in partnership with Art Reel running a small cinema, preparing accounts to 30 April. The following information is available for the tax year 2011–12:

Value added tax (VAT)
(1) The partnership voluntarily registered for VAT on 1 January 2012, and immediately began using the flat rate scheme to calculate the amount of VAT payable. The relevant flat rate scheme percentage for the partnership’s trade is 12%.

(2) For the quarter ended 31 March 2012 the partnership had standard rated sales of £59,700, and these were all made to members of the general public. For the same period standard rated expenses amounted to £27,300. Both figures are stated inclusive of VAT.

Required:
(d) (ii) Explain whether or not it was financially beneficial for the partnership to have voluntarily registered for VAT from 1 January 2012;