ACCA TX ^UK Syllabus F. Value Added Tax - Circumstances in which input VAT is non-deductible - Past Papers ^{7 / 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.

What is the maximum amount of input VAT which Alisa can reclaim in respect of her motor expenses for the quarter ended 31 March 2016?

A £108
B £138
C £180
D £125

Garfield has been registered for valued added tax (VAT) since 1 April 2008. Garfield has previously completed his VAT returns himself, but for the quarter ended 31 March 2015 there are some items for which he is unsure of the correct VAT treatment.

Garfield’s partly completed VAT computation for the quarter ended 31 March 2015 is shown below. All of the completed sections of the computation are correct, with the omissions marked as outstanding (O/S).

Note 4 – Entertaining
During the quarter ended 31 March 2015, Garfield spent £960 on entertaining overseas customers. This figure is inclusive of VAT.

Note 5 – Motor expenses
The motor car purchased on 1 January 2015 is used by Garfield 60% for business mileage. During the quarter ended 31 March 2015, Garfield spent £1,008 on repairs to the motor car and £660 on fuel for both his business and private mileage. Both of these figures are inclusive of VAT.

Required:

Calculate VAT payable by Garfield relating to Note 4 and 5 only for the quarter ended 31 March 2015.

Violet Ltd provides one of its directors with a company motor car which is used for both business and private mileage. For the quarter ended 31 March 2015, the total cost of petrol for the car was £600, of which 30% was for private use by the director. The relevant quarterly scale charge is £408. Both these figures are inclusive of value added tax (VAT).

What output VAT and input VAT entries will Violet Ltd include on its VAT return for the quarter ended 31 March 2015 in respect of the company motor car?

A. Output VAT of £68 and input VAT of £70
B. Output VAT of Nil and input VAT of £70
C. Output VAT of Nil and input VAT of £100
D. Output VAT of £68 and input VAT of £100

(c) Note that in answering this part of the question, you are not expected to take account of any of the information provided in parts (a) and (b) above unless otherwise indicated.

The following information is available in respect of Greenzone Ltd’s value added tax (VAT) for the quarter ended 31 March 2013:

(3) The managing director of Greenzone Ltd is provided with free fuel for private mileage driven in his company motor car. The relevant quarterly scale charge is £300. This figure is inclusive of VAT.

(5) Input VAT of £12,770 was incurred in respect of expenses. This figure includes the following input VAT: