ExpertMedium2 marksMultiple Choice
ACCA · Question 20 · Value added tax (VAT)
Section B - Case 1: Nimbus SaaS Ltd
Nimbus SaaS Ltd is a UK-based tech startup providing cloud software subscriptions. The company supplies digital services to both B2B (business) and B2C (consumer) clients globally.
Nimbus discovers an error in its previous VAT return where it under-declared output VAT by £8,000. Its total turnover for the current period is £1.2 million. How should Nimbus correct this error?
Section B - Case 1: Nimbus SaaS Ltd
Nimbus SaaS Ltd is a UK-based tech startup providing cloud software subscriptions. The company supplies digital services to both B2B (business) and B2C (consumer) clients globally.
Nimbus discovers an error in its previous VAT return where it under-declared output VAT by £8,000. Its total turnover for the current period is £1.2 million. How should Nimbus correct this error?
Answer options:
A.
By adjusting the current period's VAT return, as the error is below £10,000.
B.
By submitting a separate Form VAT652 to HMRC.
C.
By requesting HMRC to amend the previous return.
D.
By ignoring it, as it falls within the statutory tolerance.
How to approach this question
Check the VAT error correction thresholds. Errors up to £10,000 (or up to £50,000 if less than 1% of turnover) can be corrected on the next return.
Full Answer
A.By adjusting the current period's VAT return, as the error is below £10,000.✓ Correct
VAT errors can be corrected by adjusting the current VAT return if the net value of the error is £10,000 or less, or if it is between £10,000 and £50,000 but does not exceed 1% of the box 6 figure (net turnover) for the current return. Since the error is £8,000, it falls below the £10,000 threshold and can be corrected on the current return.
Common mistakes
Assuming all errors must be reported separately on Form VAT652.
Practice the full ACCA TX — Taxation Practice Exam 4
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