indirect tax

donnas1977

Morning All

Currently doing the engage mock as I have exam this week for indirect tax. one of the questions is on flat rate vat and is as follows

A business has recently been admitted to the flat rate scheme, and has been allocated a flat rate percentage of 12%. In the next VAT return quarter the value of its total sales and purchases were £30,000 and £4,000 respectively. Both figures are stated exclusive of VAT. How much VAT will be payable to HMRC in respect of this quarter? Choose ONE answer.

answers are

£3,120
£3,600
£4,230
£4,550

I got this to be £3120 but was marked wrong, It gives the answer as £4230 - can someone explain why?

Thanks

Donna

AK002

I got £4,230.

The £30,000 is NET of VAT, you apply the Flat Rate percentage to your gross sales for the quarter.

So add 17.5% on to the £30,000 then take your 12%.

Also, the Flat Rate Scheme means you only pay VAT on a percentage of your sales.. So the purchases g
Figure is irrelevant in this case, unless it states that the purchase is for a fixed asset addition.

I can't put the figures down cause I'm on my phone lol.

Hope this helps...

donnas1977

thanks, it did help and now i get the correct answer