AAT L3 Indirect Tax (UK VAT) 6

Question 1

The threshold for compulsory VAT deregistration is triggered when taxable turnover is expected to fall below:

Accepted Answer

The registration threshold

Answer

A business may deregister if it can satisfy HMRC that taxable supplies in the next 12 months will not exceed the deregistration threshold, which is set at the same level as the registration threshold (currently £90,000).

Question 2

Disbursements for VAT purposes are:

Accepted Answer

Expenses incurred by a business and recharged to clients at cost with no VAT markup, where specific conditions are met

Answer

A disbursement is a payment made on behalf of a client where the client is the recipient of the supply, not the business; if correctly treated as a disbursement, no VAT is added when recharging the client.

Question 3

For the purposes of the VAT retail schemes, a retailer making mixed-rate supplies uses these schemes to:

Accepted Answer

Calculate output VAT without having to identify the VAT liability on every individual sale

Answer

VAT retail schemes (Point of Sale, Apportionment, Direct Calculation) allow retailers with mixed-rate sales to calculate output VAT without separately identifying VAT on every transaction, reducing administrative burden.

Question 4

Which of the following is a consequence of issuing a VAT invoice when NOT VAT-registered?

Accepted Answer

The issuer commits a criminal offence and HMRC may demand the VAT shown

Answer

Issuing an invoice that shows a VAT number or charge when not registered is a criminal offence; HMRC can also recover the VAT shown on such invoices from the unregistered issuer.

Question 5

For a partly business, partly private use asset, a business can recover VAT on:

Accepted Answer

Only the business use proportion of the VAT

Answer

For most assets with mixed business and private use, only the business-use proportion of input VAT is reclaimable. However, for VAT purposes, certain rules allow full recovery with an output VAT charge for private use (mainly capital goods).

AAT Level 3 Practice Test

AAT Level 3 Practice Test

AAT L3 Indirect Tax (UK VAT) 6