TX - VAT

Which of the following are zero-rated supplies?

(1) Non-luxury food

(2) Books and newspapers

(3) Insurance

(4) Children’s clothing

• 1. 1, 2, 3 and 4

• 1. 1, 2 and 4 only

• 1. 3 and 4 only

• 1. 1, 2 and 3 only

Rodney is in the process of completing his VAT return for the quarter ended 31 December 2024. The following information is available:

Sales amounted to £72,500 in respect of standard rated sales to non-VAT registered customers.

On 2 November 2024, a sales invoice for £5,000 was issued in respect of a standard rated supply to a VAT registered customer (not included in the sales above). To encourage this previously late paying customer to pay promptly, Rodney offered a 10% discount for payment within 21 days of the date of the sales invoice. The customer paid within the 21-day period.

Standard rated materials amounted to £40,100.

On 31 December 2024, Rodney wrote off impairment losses in respect of two invoices which were due for payment on 1 February 2024 and 1 August 2024. The amount of output VAT originally paid in respect of each invoice was £150 and £200 retrospectively.

Unless stated otherwise all of the above figures are exclusive of VAT.

What is Rodney’s VAT liability for the quarter ended 31 December 2024?

• 1. £7,330

• 1. £7,030

• 1. £7,380

• 1. £7,230

Hampton Ltd has annual sales of £115,000 (excluding VAT). All sales are standard-rated. The company's standard-rated expenses are £12,600 per year (inclusive of VAT). The relevant flat-rate percentage for Hampton Ltd's trade is 11%.

What saving will there be for Hampton Ltd under the flat rate scheme for VAT?

• 1. £5,720

• 1. £8,250

• 1. £5,300

• 1. £7,106

Which TWO of the following statements concerning VAT registration of Sug, a trader, are correct?

• 1. Voluntary registration will be beneficial if he makes supplies to all non-VAT registered customers

• 1. Voluntary registration will be beneficial if he makes only zero-rated supplies and has input VAT he can recover

• 1. Voluntary registration means he will avoid penalties for late registration

• 1. An advantage of voluntary registration is reduced administration

Gosia is registered for VAT and operates the cash accounting scheme. She delivers some goods to a customer on 23 May in respect of an order received on 15 May. Gosia issued the invoice on 27 May and received payment from the customer on 14 June.

What is the tax point of the supply?

• 1. 15 May

• 1. 23 May

• 1. 27 May

• 1. 14 June

Beryl is registered for VAT and is preparing her VAT return for the three-month period ended 31 March 2025. During this period, she made zero-rated supplies of £14,450 and standard-rated supplies of £19,650. These figures exclude VAT.

What amount of output VAT should Beryl account for on her VAT return for the three months ended 31 March 2025?

• 1. £3,275

• 1. £5,683

• 1. £3,930

• 1. £6,820

Barbara is registered for VAT and is preparing her VAT return for the three-month period ended 31 March 2025.

Barbara incurred input VAT of £1,338 on purchases related to zero-rated supplies and input VAT of £600 related to standard-rated supplies.

What amount of input VAT should Barbara account for on her VAT return for the three months ended 31 March 2025?

• 1. £600

• 1. £1,938

• 1. £1,338

• 1. £738

Johnnie, a sole trader, completed a VAT return for the quarter to 31 December 2024 showing output VAT of £215,000 and input VAT of £126,000.

In July 2025 Johnnie’s accountant discovered that the input VAT on the VAT return had been overstated by £7,500. This was the first time that Johnnie had made an error on a VAT return. HM Revenue and Customs (HMRC) was notified and the outstanding tax paid.

What is the minimum amount of penalty that HMRC could charge Johnnie for the error?

• 1. 0% of tax lost

• 1. 15% of tax lost

• 1. 20% of tax lost

• 1. 30% of tax lost

Which TWO of the following statements are correct in relation to the cash accounting scheme for VAT?

• 1. A VAT return is completed once a year

• 1. Relief for impairment losses on trade debts is given automatically

• 1. Output VAT is accounted for when cash is received from the customer

• 1. VAT is paid over to HM Revenue and Customs in quarterly instalments

Which TWO of the following statements are correct in relation to the flat rate scheme for small businesses?

• 1. The flat rate scheme cannot be used in conjunction with the annual accounting scheme

• 1. A trader can join if VAT exclusive turnover for the next 12 months is not expected to exceed £150,000

• 1. There is normally no recovery of input VAT

• 1. The flat rate is applied to the VAT exclusive turnover

• 1. The scheme gives automatic relief for bad or impaired debts