Tx notes fa22 Final

June 2023 to March 2024 exams
Watch free ACCA TX lectures
1.3.
 
Voluntary VAT Registration 
(a)
A trader may decide to voluntarily register for VAT where taxable supplies are below the 
£85,000 registration limit. This will be beneficial when:
‣
The trader makes zero-rated supplies. Input VAT will be reclaimed, but no VAT will be 
charged on the zero-rated outputs. 
‣
The trader makes supplies to VAT registered customers. Input VAT will be reclaimed, and 
it should be possible to charge output VAT on top of the pre-registration selling price. 
This is because the output VAT will be recoverable by the customers.
(b)
It will probably not be beneficial to voluntarily register for VAT where customers are members of 
the general public, as such customers cannot recover the output VAT charged. If selling prices 
cannot be increased, the output VAT will become an additional cost to the business.
Whether or not output VAT can be passed on to customers will also be an important factor 
when deciding whether to remain below the VAT registration limit, or whether it is beneficial to 
accept additional work that results in the limit being exceeded.
 
Example 3
 
 
Vine Ltd has been in business for a number of years. All of its sales are standard rated and are to the 
general public. The company is not registered for VAT. At present, Vine Ltd’s annual income is 
£80,000. 
The company is planning to increase its prices, and this will annual income to £87,000. There is 
however no further scope for any price increases. Vine Ltd’s standard rated expenses are £4,800 p.a. 
(inclusive of VAT).
Determine if it is beneficial for Vine Ltd to put up its prices. 
1.4.
 
Pre-registration Input VAT 
(a)
Input VAT incurred prior to registration can be recovered in certain circumstances.
(b)
The circumstances in which a trader will be allowed to recover input VAT incurred on goods 
purchased and services incurred prior to the date of VAT registration are as follows:
‣
Inventory & non-current assets must be acquired for business purposes, and not be sold 
or consumed prior to registration. 
‣
The goods were not acquired more than four years prior to registration. 
‣
Services must be supplied for business purposes. 
‣
The services were not supplied more than six months prior to registration. 

---

184
Only on 
OpenTuition
you can find: Free ACCA notes 
•
Free ACCA lectures 
•
Free ACCA tests 
•
Free ACCA tutor support 
•
The largest ACCA community