ExpertACCA · Question 16 · Value added tax (VAT)
SCENARIO: Titanium Forge Ltd (TFL) is a heavy manufacturing company producing industrial valves. For the year ended 31 March 2024, TFL had augmented profits of £2.2 million. TFL owns 100% of the ordinary share capital of IronWorks Ltd, a UK resident company. During the year, TFL imported £500,000 of specialized machinery from Germany and purchased £1.2 million of new heavy plant machinery in the UK.
QUESTION: How should TFL account for the VAT on the £500,000 machinery imported from Germany?
SCENARIO: Titanium Forge Ltd (TFL) is a heavy manufacturing company producing industrial valves. For the year ended 31 March 2024, TFL had augmented profits of £2.2 million. TFL owns 100% of the ordinary share capital of IronWorks Ltd, a UK resident company. During the year, TFL imported £500,000 of specialized machinery from Germany and purchased £1.2 million of new heavy plant machinery in the UK.
QUESTION: How should TFL account for the VAT on the £500,000 machinery imported from Germany?
Answer options:
Pay VAT at the border before the goods can be released
Use postponed VAT accounting, declaring output and input VAT on the same return
Treat it as a zero-rated dispatch
Reverse charge applies, but only if the supplier is VAT registered in the UK
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