ACCA TX ^UK Syllabus F. Value Added Tax - Treatment of imports and exports - Past Papers ^{10 / 11}

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 2 – Equipment
During the quarter ended 31 March 2015, Garfield acquired some new equipment at a cost of £12,400 from a VAT registered supplier situated in the European Union.

Required:

Calculate VAT payable by Garfield relating to Note 2 only for the quarter ended 31 March 2015.

For the previous three value added tax (VAT) quarters, E-Commerce plc has been late in submitting its VAT returns and in paying the related VAT liabilities. The company is therefore currently serving a default surcharge period.

As part of your firm’s tax audit for the year ended 31 March 2014, you have discovered that E-Commerce plc has been careless in incorrectly treating the supply of standard rated services received from VAT registered businesses situated elsewhere within the European Union. This careless incorrect treatment has resulted in an underpayment of VAT to HM Revenue and Customs of £8,200 for the year ended 31 March 2014.

Required:
(ii) Explain when and how a UK VAT registered business should account for VAT in respect of the supply of services received from VAT registered businesses situated elsewhere within the European Union. (3 marks)

Clueless Ltd is registered for value added tax (VAT), but currently does not use any of the special VAT schemes. The company has annual standard rated sales of £1,200,000 and annual standard rated expenses of £550,000.

Both these figures are exclusive of VAT and are likely to remain the same for the foreseeable future. Clueless Ltd is up to date with all of its tax returns, including those for corporation tax, PAYE and VAT. It is also up to date with its corporation tax, PAYE and VAT payments. However, the company often incurs considerable overtime costs due to its employees working late in order to meet tax return filing deadlines.

Clueless Ltd pays its expenses on a cash basis, but allows customers two months credit when paying for sales.

The company does not have any impairment losses. Clueless Ltd is planning to purchase some new machinery at a cost of £22,000 (exclusive of VAT). The machinery can either be purchased from an overseas supplier situated outside the European Union, or from a VAT registered supplier situated in the European Union. Clueless Ltd is not a regular importer and so is unsure of the VAT treatment for this purchase.

Required:
(ii) Explain when and how Clueless Ltd will have to account for VAT in respect of the new machinery if it is purchased from (1) a supplier situated outside the European Union, or (2) a VAT registered supplier situated elsewhere within the European Union. (4 marks)