Tx notes fa22 Final

Answer to Example 2
 
 
 
 
A business must register for VAT if there are reasonable grounds for believing that taxable supplies 
will exceed £85,000 in the following 30 days.
Forecast income is £90,000 per month, and so taxable supplies for the 30-day period to 30 April 
2023 will exceed £85,000.
Tulip Ltd will have to notify HMRC by 30 April 2023, being the end of the 30-day period, and will be 
registered from 1 April 2023. 
Answer to Example 3
 
 
 
 
Prior to putting up its prices, Vine Ltd’s net profit is £75,200 (£80,000 - £4,800). 
If Vine Ltd puts up its prices, then it will exceed the VAT registration limit of £85,000, and the 
business will have to register for VAT. 
Output VAT will have to be absorbed by Vine Ltd, as sales are to the general public and there is no 
further scope for price increases. 
The revised annual net profit will be:
This is a decrease in net profit of £6,700 (75,200 – 68,500), and so it is not beneficial for Vine Ltd to 
put up its prices.
£
Income (87,000 
×
100/120)
72,500
Expenses (4,800 
×
100/120)
(4,000)
Net profit
68,500

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289
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Answer to Example 4
 
 
VAT Return - Quarter ended 31 March 2023
Notes:
1.
The calculation of output VAT will only take into account the discount for prompt payment if 
customers do take it. 
2.
Input VAT on UK customer entertaining cannot be reclaimed (If they had been overseas 
customers the input tax would be recoverable). 
3.
Relief for an irrecoverable debt is not given until six months from the time that payment is due. 
4.
Input VAT on motor cars not used wholly for business purposes cannot be reclaimed.