ACCA TX ^UK Syllabus F. Value Added Tax - Understand how VAT is accounted for and administered - Past Papers ^{2 / 11}

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.

How and by when does Alisa have to pay any VAT liability for the quarter ended 31 March 2016?

A Using any payment method by 30 April 2016
B Electronically by 7 May 2016
C Electronically by 30 April 2016
D Using any payment method by 7 May 2016

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:
(b) State how and when Smart Ltd will have to submit its quarterly VAT returns and pay any related VAT liability.

Note: You are not expected to cover substantial traders or the election for monthly returns. (2 marks)

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:
(iv) Explain how and when VAT registered businesses have to submit their quarterly VAT returns and pay any related VAT liability.

Note: You are not expected to cover annual VAT returns, the election for monthly returns or substantial traders. (2 marks)