ExpertEasy2 marksMultiple Choice
ACCA · Question 20 · Value added tax (VAT)
Section B: Case 1 - QuantumLeap VR Ltd
Scenario: QuantumLeap VR Ltd is a virtual reality software developer. The company began trading on 1 January 2023. Its taxable turnover was £6,000 per month for the first 10 months. In November 2023, it secured a major contract, and taxable turnover jumped to £30,000 for November and £30,000 for December.
Question: QuantumLeap VR Ltd is considering joining the VAT Cash Accounting Scheme to help with cash flow. What is the turnover limit for JOINING the Cash Accounting Scheme?
Section B: Case 1 - QuantumLeap VR Ltd
Scenario: QuantumLeap VR Ltd is a virtual reality software developer. The company began trading on 1 January 2023. Its taxable turnover was £6,000 per month for the first 10 months. In November 2023, it secured a major contract, and taxable turnover jumped to £30,000 for November and £30,000 for December.
Question: QuantumLeap VR Ltd is considering joining the VAT Cash Accounting Scheme to help with cash flow. What is the turnover limit for JOINING the Cash Accounting Scheme?
Answer options:
A.
£150,000
B.
£1,350,000
C.
£1,600,000
D.
£85,000
How to approach this question
Recall the specific turnover thresholds for VAT schemes. The Flat Rate Scheme is £150k. The Cash Accounting and Annual Accounting schemes have a joining threshold of £1.35 million.
Full Answer
B.£1,350,000✓ Correct
To join the VAT Cash Accounting Scheme, a business must have an estimated taxable turnover for the next 12 months of £1,350,000 or less. Once in the scheme, they can remain in it until their turnover exceeds £1,600,000.
Common mistakes
Confusing the joining limit (£1.35m) with the leaving limit (£1.6m) or the Flat Rate Scheme limit (£150k).
Practice the full ACCA TX — Taxation Practice Exam 5
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