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ACCA Strategic Professional · Advanced Taxation (UK) · Legitimate tax planning measures

Zara Ltd is a UK trader with taxable supplies of £91,500 over the last 12 months. Before this it was not VAT registered. Which statement correctly describes the effect of the VAT registration limit in the tax rates and allowances for this exam?

Zara Ltd must register for VAT because its taxable supplies of £91,500 over the past 12 months exceed the £90,000 registration limit. The £88,000 figure is the deregistration limit and does not govern registration. The test is based on turnover, not profits.

  1. AZara Ltd must register because its taxable turnover for the past 12 months exceeds £90,000Correct
  2. BZara Ltd need not register because the limit is £88,000 and applies only to deregistration
  3. CZara Ltd must register only if its profits, rather than turnover, exceed £90,000
  4. DZara Ltd may register only after turnover has exceeded the limit for two consecutive years

Explanation

The VAT registration limit is £90,000 of taxable turnover. Zara Ltd's turnover of £91,500 exceeds it, so registration is required. The £88,000 figure is the deregistration limit, so the second option confuses the two thresholds.

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