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    Vat Questions: GARFIELD (Mar/Jun 16)

    Uploaded by

    Rabi Hashim
    Garfield has been registered for VAT since April 2014. He needs help completing his VAT return for the quarter ended 31 March 2021. He is unsure of the correct VAT treatment for a discounted sale, equipment purchased from the EU, and some expenses. MTD requires VAT registered businesses to keep digital records and file their VAT returns using compatible software. It applies to Garfield's business as the annual taxable turnover threshold is £85,000.

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    Vat Questions: GARFIELD (Mar/Jun 16)

    Uploaded by

    Rabi Hashim
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    Garfield has been registered for VAT since April 2014. He needs help completing his VAT return for the quarter ended 31 March 2021. He is unsure of the correct VAT treatment for a discounted sale, equipment purchased from the EU, and some expenses. MTD requires VAT registered businesses to keep digital records and file their VAT returns using compatible software. It applies to Garfield's business as the annual taxable turnover threshold is £85,000.

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    Dreams are the touchstones of our characters. ― Henry David Thoreau

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    VAT_Qs_Day4

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    Garfield has been registered for VAT since April 2014. He needs help completing his VAT return for the quarter ended 31 March 2021. He is unsure of the correct VAT treatment for a discounted sale, equipment purchased from the EU, and some expenses. MTD requires VAT registered businesses to keep digital records and file their VAT returns using compatible software. It applies to Garfield's business as the annual taxable turnover threshold is £85,000.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    46 views3 pages

    Vat Questions: GARFIELD (Mar/Jun 16)

    Uploaded by

    Rabi Hashim
    Garfield has been registered for VAT since April 2014. He needs help completing his VAT return for the quarter ended 31 March 2021. He is unsure of the correct VAT treatment for a discounted sale, equipment purchased from the EU, and some expenses. MTD requires VAT registered businesses to keep digital records and file their VAT returns using compatible software. It applies to Garfield's business as the annual taxable turnover threshold is £85,000.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 3

    VAT QUESTIONS

    GARFIELD (Mar/Jun 16)

    Garfield has been registered for valued added tax (VAT) since 1 April 2014. Garfield has previously
    completed his VAT returns himself, but for the quarter ended 31 March 2021 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 2021 is shown below. All of
    the completed sections of the computation are correct, with the omissions marked as outstanding (O/S).

    Note £
    Output VAT
    Sales (all standard rated) 22,500
    Discounted sale 1 O/S
    Equipment 2 O/S
    Fuel scale charge 60

    Input VAT
    Purchases (all standard rated) (11,200)
    Motor car (purchased on 1 January 2021) 0
    Equipment 2 O/S
    Impairment losses 3 O/S
    Entertaining – UK customers 0
    – Overseas customers 4 O/S
    Motor expenses 5 O/S
    ––––
    VAT payable 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 2021, 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 2021, 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 2021, Garfield wrote off three impairment losses. Details are as follows:

    Amount Invoice date Payment due date


    £1,400 30 July 2020 29 August 2020
    £2,700 12 September 2020 12 October 2020
    £1,900 4 October 2020 3 November 2020
    Note 4 – Entertaining
    During the quarter ended 31 March 2020, Garfield spent £960 on entertaining overseas customers. This
    figure is inclusive of VAT.
    Note 5 – Motor expenses
    The motor car purchased on 1 January 2021 is used by Garfield 60% for business mileage. During the
    quarter ended 31 March 2018, 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 would like some information on Making Tax Digital (MTD). He is aware the system has been
    implemented by HMRC and would he like to know more about it and whether it is relevant to small
    businesses.

    Required:
    (a) Calculate the amount of value added tax (VAT) payable by Garfield for the quarter
    ended 31 March 2021. (7 marks)
    (b) Give a brief explanation if Making Tax Digital (MTD) and state whether it applies to Garfield’s
    business.
    (3 marks)
    (Total: 10 marks)
    SMART LTD (Sep/Dec 15)

    Smart Ltd commenced trading on 1 September 2020. The company’s sales for the first four months
    of trading were as follows:
    £
    2020 September 26,000
    October 47,000
    November 134,000
    December 113,000
    On 1 November 2020, the company signed a contract valued at £86,000 for completion during
    November 2020.
    All of the above figures are stated exclusive of value added tax (VAT). Smart Ltd only supplies
    services and all of the company’s supplies are standard rated.
    Smart Ltd allows its customers 60 days credit when paying for services, and it is concerned that some
    customers will default on the payment of their debts. The company pays its purchase invoices as soon
    as they are received.
    Smart Ltd does not use either the VAT cash accounting scheme or the annual accounting scheme.

    Required:
    (a) State, giving reasons, the date from which Smart Ltd was required to register for
    value added tax (VAT), and by when it was required to notify HM Revenue and
    Customs (HMRC) of the registration. (3 marks)
    (b) State how and when Smart Ltd will have to submit its quarterly VAT
    returns and pay any related VAT liability.
    Note: You are not expected to cover substantial traders or the election for monthly
    returns. (2 marks)
    (c) State the circumstances when a VAT registered business like Smart Ltd, which is not
    using the VAT cash accounting scheme, would still have to account for output VAT
    at the time that payment is received from a customer. (2 marks)
    (d) Advise Smart Ltd as to why it should be beneficial for the company to use the VAT
    cash accounting scheme. (3 marks)
    (Total: 10 marks)

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