ACCA TX ^UK Syllabus F. Value Added Tax - VAT exam questions - Past Papers ^{11 / 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).

Unless otherwise stated, all of the figures in the following notes are stated exclusive of VAT.

Note 1 – Discounted sale
On 10 February 2015, a sales invoice for £4,300 was issued by Garfield in respect of a standard rated supply. To encourage this previously late paying customer to pay promptly, Garfield offered a 10% discount for payment within 14 days of the date of the sales invoice. The customer paid within the 14-day period.

This invoice has not been taken into account in calculating the output VAT figure of £22,500, and this is the only sale for which Garfield has offered a prompt payment discount.

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.

Note 3 – Impairment losses
On 31 March 2015, Garfield wrote off three impairment losses. Details are as follows:

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.

Additional information
Garfield does not use the cash accounting scheme, the annual accounting scheme or the flat rate scheme, but has read that the use of these schemes can be beneficial for small businesses such as his.

Garfield’s VAT exclusive annual turnover is currently £450,000, and this is expected to steadily decrease over the coming years. He pays for most of his purchases and expenses on a cash basis, but allows many of his customers 30 days credit when paying for sales.

Required:
(a) Calculate the amount of value added tax (VAT) payable by Garfield for the quarter ended 31 March 2015. (7 marks)

(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:

(1) Output VAT of £38,210 was charged in respect of sales. This figure includes output VAT of £400 on a
deposit received on 29 March 2013, which is in respect of a contract that is due to commence on 20 April 2013.

(2) In addition to the above, Greenzone Ltd also charged output VAT of £4,330 on sales to Are Ltd and Can Ltd (see part (b) above). These two companies and Greenzone Ltd are not currently registered as a group for VAT purposes.

(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.

(4) On 31 March 2013, Greenzone Ltd wrote off an impairment loss in respect of a sales invoice that was issued on 15 September 2012. This invoice was due for payment on 31 October 2012. Output VAT of £640 was originally paid in respect of the sale.

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

For the quarters ended 31 December 2010 and 30 September 2012, Greenzone Ltd was two months late in submitting its VAT returns and in paying the related VAT liabilities. All of the company’s other VAT returns have been submitted on time, and the related VAT liabilities have been paid on time.

Required:
(i) Calculate the amount of value added tax (VAT) payable by Greenzone Ltd for the quarter ended 31 March 2013;

Note: Your calculation should clearly refer to all of the items of input VAT listed in note (5), indicating by the use of zero (0) any items that do not require adjustment. (7 marks)