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Indirect Tax (UK VAT) Flashcards

6 cards from real AAT L3 practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

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  1. The cash accounting scheme for VAT means that:

    Answer: Output VAT is accounted for when payment is received and input VAT is reclaimed when payment is made

    Under the cash accounting scheme, businesses account for VAT on the basis of cash flow — output VAT is paid when customers pay, and input VAT is reclaimed when suppliers are paid, providing automatic bad debt relief.

  2. Which of the following would be classified as a zero-rated supply for UK VAT?

    Answer: Printed books and newspapers

    Printed books and newspapers are zero-rated for UK VAT. Adult clothing is standard-rated; takeaway hot food is generally standard-rated; domestic electricity is reduced rate (5%).

  3. Output VAT is the VAT that a business:

    Answer: Charges on its taxable sales and owes to HMRC

    Output VAT is charged by a VAT-registered business on its taxable sales; it is collected from customers on behalf of HMRC and must be accounted for on the VAT return.

  4. The annual accounting scheme for VAT allows a business to:

    Answer: Submit one VAT return per year with advance payments during the year

    The annual accounting scheme lets eligible businesses file one VAT return per year; they make interim advance payments (typically nine monthly payments at 10% of the previous year's liability) and a balancing payment.

  5. A business makes both taxable and exempt supplies and is partially exempt. What is the impact on input VAT recovery?

    Answer: Only input VAT attributable to taxable supplies (plus a proportion of residual input tax) can be reclaimed

    Under partial exemption rules, input VAT directly attributable to taxable supplies is recoverable; input VAT on exempt supplies is not; residual (mixed) input VAT is apportioned between taxable and exempt supplies.

  6. The VAT fuel scale charge applies to:

    Answer: Reclaiming input VAT on business fuel purchased for private use in company vehicles

    The fuel scale charge is a method of accounting for output VAT on the private use of road fuel. If a business reclaims all input VAT on road fuel (including private use), it must account for output VAT using scale charges based on CO2 emissions.