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

Tamsin is a VAT-registered sole trader who makes only standard-rated supplies. In the quarter she bought a laptop for use solely in her business for £1,200 plus VAT at the standard rate, and a printer for £600 including VAT at the standard rate, also used solely in the business. Both purchases are supported by valid VAT invoices. What is the total input VAT she can recover?

Input VAT recoverable is £340. The laptop carries VAT of £240 (20% of the VAT-exclusive price) and the printer carries £100 (the VAT fraction 20/120 of the VAT-inclusive price). Both are used wholly for taxable business supplies, so all of it is recoverable.

  1. A£440Correct
  2. B£240
  3. C£340
  4. D£400

Explanation

Laptop VAT is £1,200 x 20% = £240. Printer VAT is £600 x 20/120 = £100. Total recoverable is £340. The figure of £440 is wrong because it wrongly applies 20% to the VAT-inclusive printer price (£120) and so overstates the VAT. Wait: £240 + £120 = £360, not £440, so the correct total is £340.

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