ExpertMedium2 marksMultiple Choice
ACCA · Question 14 · Value added tax (VAT)
Section A
Chloe, a freelance drone operator, registered for VAT on 1 April 2023 and immediately joined the Flat Rate Scheme. Her sector's flat rate percentage is 12%. In her first quarter to 30 June 2023, her VAT inclusive turnover was £15,000.
How much VAT must Chloe pay to HMRC for this quarter?
Section A
Chloe, a freelance drone operator, registered for VAT on 1 April 2023 and immediately joined the Flat Rate Scheme. Her sector's flat rate percentage is 12%. In her first quarter to 30 June 2023, her VAT inclusive turnover was £15,000.
How much VAT must Chloe pay to HMRC for this quarter?
Answer options:
A.
£1,800
B.
£1,650
C.
£1,500
D.
£2,500
How to approach this question
Apply the 1% discount to the flat rate percentage for the first year of registration. Multiply the VAT-inclusive turnover by this reduced percentage.
Full Answer
B.£1,650✓ Correct
Because Chloe is in her first year of VAT registration, she is entitled to a 1% discount on her flat rate percentage. Her effective rate is 12% - 1% = 11%. The flat rate is applied to the VAT-inclusive turnover: £15,000 x 11% = £1,650.
Common mistakes
Forgetting the 1% first-year discount or applying the percentage to the VAT-exclusive turnover.
Practice the full ACCA TX — Taxation Practice Exam 3
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