Section A

Vertex Ltd registered for VAT on 1 October. Prior to registration, the company incurred VAT on various expenses. Which of the following pre-registration VAT amounts can Vertex Ltd recover?

Answer options:

VAT on services received 12 months before registration.

VAT on goods purchased 3 years ago and still on hand at the date of registration.

VAT on goods purchased 2 years ago and sold before registration.

VAT on services received 5 years ago.

How to approach this question

Recall the pre-registration VAT rules: Services within 6 months, Goods within 4 years (and still on hand).

Full Answer

B.VAT on goods purchased 3 years ago and still on hand at the date of registration.✓ Correct

A newly registered business can recover pre-registration VAT on goods purchased up to 4 years before registration, provided the goods are still on hand at the date of registration. For services, the time limit is 6 months before registration.

Common mistakes

Confusing the time limits for goods (4 years) and services (6 months).

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Practice the full ACCA TX — Taxation Practice Exam 4

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