ICAEW AF · Chapter 4 · Question 8 of 8
In a VAT quarter, a business made sales of £126,000 excluding VAT. Of these, £18,000 were zero-rated and the remainder were standard-rated at 20%. It made purchases, all standard-rated, of £66,000 including VAT. How much VAT is payable to the tax authority for the quarter?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) £10,600
Explanation
Output VAT = (£126,000 - £18,000) x 20% = £21,600; zero-rated sales are taxable at 0%. Input VAT = £66,000 x 1/6 = £11,000, because the purchases figure includes VAT. VAT payable = £21,600 - £11,000 = £10,600.
More Sales tax (VAT) MCQs
- Q2A VAT-registered business receives an invoice for £5,436, including VAT at 20%. How much of this amount is VAT?
- Q3At the start of a quarter, a business owed £9,800 to the tax authority for VAT, which it paid during the quarter. In the quarter, output…
- Q4A VAT-registered business buys a machine for £18,000 plus VAT of £3,600. It also pays delivery of £500 plus VAT of £100. All the VAT is…
- Q5A business that is NOT registered for VAT buys inventory for £1,200 plus VAT of £240. At what amount should the purchase be recorded?
- Q6The sales day book for the month shows total net sales of £37,100, VAT of £7,420 and gross total of £44,520. What entry is made in the VAT…