VAT L5 Starter Quiz

Belle’s Balls, a VAT-registered trader, has received a credit note from a supplier. What will be its effect on VAT? Tick the correct answer.

• Input tax will increase.

• Output tax will increase.

• Input tax will decrease.

• Output tax will decrease.

Tick to show whether each of the following statements is true or false:

• The receipt of an invoice from a supplier will increase output tax.

• The receipt of a credit note from a supplier will reduce input tax.

• The issue of a credit note to a customer will reduce output tax.

• The issue of an invoice to a customer will increase output tax.

Star Enterprises has spent £750 on a staff party, £590 on entertaining UK customers and £12,375 on a second hand van. All figures include VAT. How much input tax can be reclaimed?

• £2,187.50 (staff party and van only)

• £1,500.00 (entertaining UK customers and van only)

• £3,000.00 (staff party and entertaining UK customers only)

• £0.00 (no input tax can be reclaimed)

The sales manager of Freddie’s Pharmacies, a VAT-registered business, has been provided with a company car and fuel. The car is used for both business and private purposes. Petrol paid for by the company in the last quarter totalled £850.50 including VAT. The car has a quarterly fuel scale charge of £349 including VAT. What is the net effect of these items on the VAT payable for the quarter? Tick the correct answer below.

• Increases by £83.58

• Decreases by £83.58

• Increases by £199.92

• Decreases by £199.92

75% of Ellie’s Cake Shop sales are standard-rated, 5% of sales are zero-rated and 20% of sales are exempt supplies. Input tax is reclaimed on both purchases used to generate both taxable supplies and exempt supplies, as well as on the business’s running expenses. Which of the following statements is true? Tick one box.

• All input tax can be recovered provided that 25% of the input tax does not exceed the de minimis limit.

• All of the input tax relating to taxable supplies can be recovered. It is also possible to recover 50% of the input tax relating to exempt supplies and expenses, provided this amount does not exceed the de minimis limit.

• All of the input tax can be recovered provided that the proportion of input tax relating to exempt supplies is less than 50% of the total input tax and on average less than £625 per month.

• All of the input tax can be recovered relating to taxable supplies. It is also possible to recover 50% of the input tax relating to expenses, provided this amount does not exceed the de minimis limit.

Which of the following statements about the cash accounting scheme are true? Tick as many as apply.

• Input tax is reclaimed with reference to the date the supplier is physically paid.

• It is not necessary to send VAT invoices to customers.

• Traders can join the scheme provided their annual taxable turnover does not exceed £1,600,000.

• It would be beneficial for a business which buys goods for cash and sells on credit to join the cash accounting scheme.

A business is a member of the flat rate scheme and has been given a flat rate percentage of 7.5%. In the last quarter, the following sales were made: - Standard-rated sales, excluding VAT £24,750 - Zero-rated sales £10,467 - Exempt sales £11,465 What would be the VAT payable figure for the quarter?

• £3,872.40

• £2,500.00

• £4,000.00

• £3,000.00

Tick the appropriate box to show whether or not input tax can be recovered by Ally’s Wheels, a VAT-registered business, on the following items:

• Purchases for resale

• New laptop for the owner’s daughter to be used for homework

• New computer for the office, where the VAT receipt has been misplaced

• Van to be used for deliveries

• Party entertaining overseas customers

If the balance on a business’ VAT control account is showing a balance due to HMRC of £5,827.50 and the VAT return for the corresponding quarter shows VAT due of £2,541.10, which of the following explains the difference? Tick to show the correct answer.

• A payment to HMRC of £3,286.40 has been included twice in the VAT control account.

• Output VAT of £3,286.40 has been included twice in the VAT control account.

Jo’s business is having cash flow problems and she is looking to make changes that make her monthly outgoings more predictable. Which accounting scheme would it be beneficial for Jo to join?

• Annual accounting

• Cash accounting

• Flat rate