R03 Value added tax: free practice questions

1. Question 1 of 5

   When must a trader register for VAT on the historic test?

   Option A: When taxable supplies in the past 12 months exceed £85,000Option B: When total turnover in the tax year exceeds £90,000Option C: When taxable supplies in the past 12 months exceed £90,000Option D: When profits exceed £50,000

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   The answer is C: When taxable supplies in the past 12 months exceed £90,000

   A trader must register when taxable supplies in the previous 12 months exceed £90,000, notifying HMRC within 30 days of the end of the month and registering from the first day of the second month. There's also a forward-looking 30-day test.

   Why the other options are wrong

   A

   The threshold is £90,000.

   B

   The test uses taxable supplies over a rolling 12 months.

   D

   Registration depends on taxable supplies, not profit.

2. Question 2 of 5

   What is the key difference between zero-rated and exempt supplies?

   Option A: Exempt suppliers can reclaim input VAT; zero-rated can'tOption B: Zero-rated suppliers can reclaim input VAT; exempt suppliers generally can'tOption C: Zero-rated supplies count as outside the VAT system altogetherOption D: There's no practical difference

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   The answer is B: Zero-rated suppliers can reclaim input VAT; exempt suppliers generally can't

   Zero-rated supplies are taxable at 0%, so the supplier can recover input VAT. Exempt supplies (such as insurance and finance) carry no VAT, and related input VAT generally can't be recovered.

   Why the other options are wrong

   A

   It's the other way round.

   C

   Zero-rated supplies are taxable supplies at 0%.

   D

   Input VAT recovery differs significantly.

3. Question 3 of 5

   Which input VAT can a VAT-registered business NOT normally reclaim?

   Option A: VAT on a van used in the businessOption B: VAT on accountancy feesOption C: VAT on office equipment used for the businessOption D: VAT on entertaining clients and customers

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   The answer is D: VAT on entertaining clients and customers

   Input VAT on business entertainment and on cars (unless bought wholly for business) can't be reclaimed. Partially exempt businesses face further restrictions.

   Why the other options are wrong

   A

   Vans used for business are recoverable.

   B

   Business services are recoverable.

   C

   Business purchases for taxable supplies are recoverable.

4. Question 4 of 5

   A business on the flat rate scheme has VAT-inclusive turnover of £60,000 and a sector rate of 12%. What VAT does it pay HMRC?

   Option A: £10,000Option B: £6,000Option C: £9,900Option D: £7,200

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   The answer is D: £7,200

   Under the flat rate scheme, VAT due = VAT-inclusive turnover × sector rate: £60,000 × 12% = £7,200, with generally no reclaim of input VAT.

   Why the other options are wrong

   A

   That's the output VAT under normal accounting, before input VAT.

   B

   The flat rate is applied to VAT-inclusive turnover.

   C

   16.5% is only for limited cost businesses.

5. Question 5 of 5

   A business's VAT quarter ends on 30 April. When are its return and payment due, assuming it doesn't pay by direct debit?

   Option A: 31 MayOption B: 30 MayOption C: 7 JuneOption D: 31 July

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   The answer is C: 7 June

   Returns and payment are due by the 7th day of the month after the month following the period end, so 7 June for a quarter to 30 April. Direct debit gives three extra working days. Returns go through MTD software.

   Why the other options are wrong

   A

   The deadline is the 7th day of the second month.

   B

   The deadline is a week into June.

   D

   That's too late; the deadline is 7 June.

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