ExpertMedium2 marksMultiple Choice
ACCA · Question 10 · Value added tax (VAT)
Section A: Objective Test
Zenith Consulting registered for VAT on 1 October 2023. Prior to registration, the business incurred the following VAT on expenses:
- £400 on accountancy services provided in August 2023.
- £600 on a marketing campaign that ran in February 2023.
- £1,200 on computer equipment purchased in November 2022, which is still in use by the business.
How much pre-registration VAT can Zenith Consulting recover on its first VAT return?
Section A: Objective Test
Zenith Consulting registered for VAT on 1 October 2023. Prior to registration, the business incurred the following VAT on expenses:
- £400 on accountancy services provided in August 2023.
- £600 on a marketing campaign that ran in February 2023.
- £1,200 on computer equipment purchased in November 2022, which is still in use by the business.
How much pre-registration VAT can Zenith Consulting recover on its first VAT return?
Answer options:
A.
£400
B.
£1,600
C.
£2,200
D.
£1,200
How to approach this question
Apply the pre-registration VAT rules: VAT on services can be recovered if supplied within 6 months of registration. VAT on goods can be recovered if supplied within 4 years of registration AND the goods are still on hand at registration.
Full Answer
B.£1,600✓ Correct
Pre-registration VAT can be recovered subject to strict time limits. For services, they must have been supplied within 6 months prior to registration. The accountancy services (August 2023) are within 6 months of 1 October 2023, so £400 is recoverable. The marketing campaign (February 2023) is more than 6 months prior, so £600 is not recoverable. For goods, they must have been supplied within 4 years and still be on hand at registration. The computer equipment (November 2022) meets this, so £1,200 is recoverable. Total recoverable = £400 + £1,200 = £1,600.
Common mistakes
Applying the 4-year rule to services or the 6-month rule to goods.
Practice the full ACCA TX — Taxation Practice Exam 5
32 questions · hints · full answers · grading
More questions from this exam
Q01Section A: Objective Test
Marcus runs an agricultural consultancy as a sole trader. He submitted...EasyQ02Section A: Objective Test
Helena is employed by a tech startup. During the 2023/24 tax year, her...MediumQ03Section A: Objective Test
EcoDrive Ltd provided its sales director with a new fully electric com...MediumQ04Section A: Objective Test
Julian sold an antique clock (a non-wasting chattel) for £7,200 in Dec...MediumQ05Section A: Objective Test
Sarah bought a house on 1 January 2014 and lived in it as her main res...Medium