You are the accountant and tax adviser to Hilary Haller who owns a business comprising four...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
You are the accountant and tax adviser to Hilary Haller who owns a business comprising four shops specialising in selling a wide range of organic fruit, vegetables and cereals as well as some processed foods and confectionary. Hilary Haller has asked you to advise her on her VAT position. She tells you that she has not registered for VAT yet as her standard rated supplies are significantly below the annual VAT limit of £85,000. The information for the four shops is shown below. It is important to note that in your discussion with Hilary Haller you discover that the figures recorded for sales (and shown below) do not include any VAT- even on the standard rated items. Hilary Haller confirmed in answer to your question that customers were charged for the VAT on the standard rated items. By contrast the figures shown for purchases do include the VAT (gross of VAT figures are shown below therefore). Sales Excluding VAT Zero rated foods Total Shop A Shop B Shop C Shop D 100,000 23,000 27,000 18,000 32,000 Standard Rated Items 70,000 30,000 12,000 15,000 13,000 Total 170,000 Purchases Goods for resale Zero rated foods 50,000 Standard Rated Items 18,000 Other purchases Delivery Van 30,000 Required: Write a letter to your client, Hilary Haller. In your letter you should advise Hilary Haller of the following: a) The overall VAT position including an explanation of the relevant VAT rules, how Hilary Haller should account for VAT on zero rated and standard rated items and how to communicate with HMRC in the future. (15 marks) b) Calculate the VAT payable or recoverable as the case may be - ensure that you show a clear summary with detailed workings included in an appendix to your letter. Remember that marks will be awarded for style and presentation. (10 marks) (25 marks) RELIEFS AND ALLOWANCES-2020/21 and 2019/20 (2018/19) Income Tax - Personal reliefs and allowances Personal Allowance £12,500 (£11,850) Income Tax - Taxable bands are as follows: Basic Rate 20% Higher Rate 40% Additional Rate 45% £0-£37,500 (£0-£34,500) £37,501-£150,000 (£34,501 - £150,000) over £150,000 (over £150,000) Corporation Tax-rates and allowances Main rate of corporation tax 19% (19%) Capital Gains Tax-rates and allowances Standard rate (assets excluding residential property) 10% (18%) Standard rate (residential property) 18% (18%) Higher rate (assets excluding residential property) 20% (28%) Higher rate (residential property) 28% (28%) Business Asset Disposal relief rate 10% (10%) Business Asset Disposal relief lifetime limit (Note 1): £1,000,000 (10 ma) (10 mo) Annual Exempt Amount (Note 1) £12,300 (12,000) (11,700) Note 1: this shows limit/amount for 2020/21 and previous two tax years Continued on next page (National Insurance Contributions and VAT)....... National Insurance Contributions 2020/21 (2019/20) (2018/19) (extracts) Employer Employee Class 1 Weekly earnings / Annual Nil £0-£169(166) (162)/£8,788 (£8,632)(£8,424) £0-£183(166) (162)/£9,500(£8,632)(£8,424) £169.01-£962(962)(892)/£50,000(£46,350) £183.01- £962(962)(892)/£50,000(£46,350) Over £962(962)(892)over £50,000 (£46,350) SEE BELOW SEE ABOVE Nil 13.8% (13.8%) SEE BELOW SEE ABOVE 12% (12%) 13.8% (13.8%) 2% (2%) Class 2 Small earnings exception Normal rate £6,475 (6,365) (6,205) £3.05 (3.00) (2.95) per week Class 3 See note below. Class 4 Profits £9,500(8,632) - £50.000 (£8,424 - £46,350) Profits over £50,000 (50,000) (£46,350) 9% (9%) 2% (2%) Note: Class 3 contributions are voluntary contributions paid by people who wish to protect their entitlement to the State Pension and who do not pay enough National Insurance contributions in another class. VAT (NO CHANGE IN 2020/21 FROM 2019/20 or after 1 April 2020) After 1 April 2019 After 1 April 2018 Standard rate 20% 20% £85,000 Annual Registration Limit De-registration Limit £85,000 £83,000 £1,350,000 £83,000 £1,350,000 Cash Acc Scheme - max to to join Annual Acc Scheme -max to to join Optional Flat Rate Scheme - £1,350,000 £1,350,000 Max taxable turnover (to) (ex VAT) £150,000 £150,000 You are the accountant and tax adviser to Hilary Haller who owns a business comprising four shops specialising in selling a wide range of organic fruit, vegetables and cereals as well as some processed foods and confectionary. Hilary Haller has asked you to advise her on her VAT position. She tells you that she has not registered for VAT yet as her standard rated supplies are significantly below the annual VAT limit of £85,000. The information for the four shops is shown below. It is important to note that in your discussion with Hilary Haller you discover that the figures recorded for sales (and shown below) do not include any VAT- even on the standard rated items. Hilary Haller confirmed in answer to your question that customers were charged for the VAT on the standard rated items. By contrast the figures shown for purchases do include the VAT (gross of VAT figures are shown below therefore). Sales Excluding VAT Zero rated foods Total Shop A Shop B Shop C Shop D 100,000 23,000 27,000 18,000 32,000 Standard Rated Items 70,000 30,000 12,000 15,000 13,000 Total 170,000 Purchases Goods for resale Zero rated foods 50,000 Standard Rated Items 18,000 Other purchases Delivery Van 30,000 Required: Write a letter to your client, Hilary Haller. In your letter you should advise Hilary Haller of the following: a) The overall VAT position including an explanation of the relevant VAT rules, how Hilary Haller should account for VAT on zero rated and standard rated items and how to communicate with HMRC in the future. (15 marks) b) Calculate the VAT payable or recoverable as the case may be - ensure that you show a clear summary with detailed workings included in an appendix to your letter. Remember that marks will be awarded for style and presentation. (10 marks) (25 marks) RELIEFS AND ALLOWANCES-2020/21 and 2019/20 (2018/19) Income Tax - Personal reliefs and allowances Personal Allowance £12,500 (£11,850) Income Tax - Taxable bands are as follows: Basic Rate 20% Higher Rate 40% Additional Rate 45% £0-£37,500 (£0-£34,500) £37,501-£150,000 (£34,501 - £150,000) over £150,000 (over £150,000) Corporation Tax-rates and allowances Main rate of corporation tax 19% (19%) Capital Gains Tax-rates and allowances Standard rate (assets excluding residential property) 10% (18%) Standard rate (residential property) 18% (18%) Higher rate (assets excluding residential property) 20% (28%) Higher rate (residential property) 28% (28%) Business Asset Disposal relief rate 10% (10%) Business Asset Disposal relief lifetime limit (Note 1): £1,000,000 (10 ma) (10 mo) Annual Exempt Amount (Note 1) £12,300 (12,000) (11,700) Note 1: this shows limit/amount for 2020/21 and previous two tax years Continued on next page (National Insurance Contributions and VAT)....... National Insurance Contributions 2020/21 (2019/20) (2018/19) (extracts) Employer Employee Class 1 Weekly earnings / Annual Nil £0-£169(166) (162)/£8,788 (£8,632)(£8,424) £0-£183(166) (162)/£9,500(£8,632)(£8,424) £169.01-£962(962)(892)/£50,000(£46,350) £183.01- £962(962)(892)/£50,000(£46,350) Over £962(962)(892)over £50,000 (£46,350) SEE BELOW SEE ABOVE Nil 13.8% (13.8%) SEE BELOW SEE ABOVE 12% (12%) 13.8% (13.8%) 2% (2%) Class 2 Small earnings exception Normal rate £6,475 (6,365) (6,205) £3.05 (3.00) (2.95) per week Class 3 See note below. Class 4 Profits £9,500(8,632) - £50.000 (£8,424 - £46,350) Profits over £50,000 (50,000) (£46,350) 9% (9%) 2% (2%) Note: Class 3 contributions are voluntary contributions paid by people who wish to protect their entitlement to the State Pension and who do not pay enough National Insurance contributions in another class. VAT (NO CHANGE IN 2020/21 FROM 2019/20 or after 1 April 2020) After 1 April 2019 After 1 April 2018 Standard rate 20% 20% £85,000 Annual Registration Limit De-registration Limit £85,000 £83,000 £1,350,000 £83,000 £1,350,000 Cash Acc Scheme - max to to join Annual Acc Scheme -max to to join Optional Flat Rate Scheme - £1,350,000 £1,350,000 Max taxable turnover (to) (ex VAT) £150,000 £150,000
Expert Answer:
Answer rating: 100% (QA)
Dear Hilary Thank you for asking me to advise you on your VAT position I have set out below an expla... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0324300987
10th Edition
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones
Posted Date:
Students also viewed these accounting questions
-
You are the accountant for Clear Water Bay Company, an equipment manufacturer. In order to help customers finance their purchases, Clear Water Bay often leases, rather than sells, the equipment....
-
You are the accountant for Nello Company, which manufactures specialty equipment. Nello has been in financial difficulty, so its suppliers require purchases to be paid in cash. Furthermore, Nello has...
-
You are the accountant at Stephos Greek Taverna. After completing the December 31, 2017 financial statements, you need to post the closing entries to prepare for the 2018 year. Start the process by...
-
Mike and Linda are a married couple who file jointly and have $100,000 of taxable income. They have three dependent children who are full-time students in 2022. Mike and Linda provided $8,000 of...
-
The statement of cash flows for Steinhoff Corporation for the year ended June 30, 2010, reported cash received from customers of $ 5,680,000. Steinhoffs comparative balance sheets for June 30, 2009,...
-
How does Leslie Miley stand for all different persons who have tried, failed, and sometimes succeeded in becoming a member of an organization wherein most have been most alike?
-
Natural gas ( \(ho=0.0044\) slugs \(/ \mathrm{ft}^{3}\) and \(\left.u=5.2 \times 10^{-5} \mathrm{ft}^{2} / \mathrm{s} ight)\) is pumped through a horizontal 6-in.-diameter cast-iron pipe at a rate of...
-
Prairie Park was started on April 1 by C. J. Amaro and associates. The following selected events and transactions occurred during April. Apr. 1 Stockholders invested $50,000 cash in the business in...
-
Would you be able to recreate the planning and strategic management process that Mr. Nadella used? What would Microsoft's planning flowchart look like based on the goal he proposed? Did Mr. Nadella...
-
In 1879, A.A. Michelson measured the velocity of light in air using a modification of a method proposed by the French physicist Foucault. Twenty of these measurements are in table 6E.27 (the value...
-
Prepare an income statement from the following year-end adjusted trial balance. Adjusted Trial Balance December 31 Cash Accounts receivable Prepaid insurance Office supplies Office equipment...
-
Modify the generic Pair class so that both values have the same type.
-
Implement an iterator for the BinarySearchTree class that visits the nodes in sorted order. In the constructor, keep pushing left nodes on a stack until you reach null. In each call to next, deliver...
-
How can you communicate with a web server without using sockets?
-
Design a DTD that describes a bank with bank accounts.
-
What happens if the Socket constructors second argument is not the same as the port number at which the server waits for connections?
-
Which motor types below would qualify as "induction motors" (you must correctly select the right answers and none of the wrong answers to score on this question Google some of the motor types if...
-
Calculate the electrical conductivity of a fiber-reinforced polyethylene part that is reinforced with 20 vol % of continuous, aligned nickel fibers.
-
Multiple Choice Questions 1. Which of the following items should be classified under the heading of cash on the balance sheet? Postdated checks Certificates of deposit a. Yes ...... Yes b. Yes .........
-
List four possible causes of goodwill.
-
Certain organizations have been influential in the establishment of accounting principles. The following is a list of abbreviations for several of these organizations, as well as a list of statements...
-
1. Describe the bases of power held by Dr. Jamie Thompson. Describe the bases of power held by Dr. Elizabeth Clarke. 2. What activities and people have contributed to Jaime Thompsons power? What...
-
What is the current in the wire in Figure Q22.1? 1.0 VR + 1.0-1.0V + FIGURE Q22.1
-
Electroplating uses electrolysis to coat one metal with another. In a copper-plating bath, copper ions with a charge of +2e move through the electrolyte from the copper anode to the cathode the metal...
Study smarter with the SolutionInn App