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ACCA Applied Skills · Taxation (UK) · The computation of VAT liabilities

Orla trades and makes taxable supplies of £70,000 (standard-rated) in the last 12 months, together with exempt supplies of £25,000. Which of the following is correct regarding compulsory VAT registration, using the registration limit of £90,000?

Orla need not register for VAT. Only taxable supplies count towards the £90,000 registration limit, and hers are £70,000. The £25,000 of exempt supplies is excluded from the test, so adding it to reach £95,000 would be wrong.

  1. AShe must register because total supplies are £95,000
  2. BShe need not register, because only taxable supplies of £70,000 count and this is below £90,000Correct
  3. CShe must register because exempt supplies count as taxable at 0%
  4. DShe need not register only if the exempt supplies are made to VAT-registered customers

Explanation

Only taxable supplies (standard, reduced and zero-rated) count towards the £90,000 registration limit. Exempt supplies are excluded, so taxable turnover is £70,000, which is below the limit. The total of £95,000 wrongly includes the exempt supplies.

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