ExpertMedium2 marksMultiple Choice
ACCA · Question 12 · Value Added Tax (VAT)
Section A: Objective Test
Jupiter Ltd registered for VAT on 1 October 2023. Prior to registration, the company incurred the following VAT-inclusive expenses:
- £1,200 on accounting services in August 2023.
- £3,600 on inventory in July 2023 (all of which was sold by September 2023).
- £6,000 on a computer in January 2020 (still in use on 1 October 2023).
Assuming a VAT rate of 20%, how much pre-registration input VAT can Jupiter Ltd recover?
Section A: Objective Test
Jupiter Ltd registered for VAT on 1 October 2023. Prior to registration, the company incurred the following VAT-inclusive expenses:
- £1,200 on accounting services in August 2023.
- £3,600 on inventory in July 2023 (all of which was sold by September 2023).
- £6,000 on a computer in January 2020 (still in use on 1 October 2023).
Assuming a VAT rate of 20%, how much pre-registration input VAT can Jupiter Ltd recover?
Answer options:
A.
£200
B.
£1,200
C.
£1,800
D.
£1,000
How to approach this question
Apply the pre-registration rules: Services within 6 months. Goods within 4 years provided they are still on hand at the date of registration. Calculate the VAT fraction (1/6) of the gross amounts.
Full Answer
B.£1,200✓ Correct
Pre-registration input VAT can be recovered on:
1. Services supplied within 6 months prior to registration. The accounting services in August 2023 qualify. VAT = £1,200 x 20/120 = £200.
2. Goods supplied within 4 years prior to registration, provided they are still on hand at the date of registration.
- The inventory was sold before registration, so no VAT is recoverable.
- The computer was bought within 4 years (Jan 2020 to Oct 2023 is < 4 years) and is still in use. VAT = £6,000 x 20/120 = £1,000.
Total recoverable VAT = £200 + £1,000 = £1,200.
Common mistakes
Claiming VAT on goods that have already been sold or consumed prior to registration.
Practice the full ACCA TX — Taxation Practice Exam 1
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