VAT Quiz Questions And Answers

1. What does Anchor input tax relate to?

Purchases

Sales

Profit

None of the above

Inputs are the things you PUT IN to your business – i.e. your purchases

Explanation

Inputs are the things you PUT IN to your business – i.e. your purchases

2. Why doesn't Anchor pay VAT on invoices for bulk mobile phones?

Bulk purchases of mobile phones are zero rated for charities

Bulk purchases of mobile phones are exempt from VAT

Bulk purchases of mobile phones are subject to the domestic reverse charge – VAT is paid direct to HMRC

The tax team reduce our costs by missing things off the VAT return

Anchor accounts for the VAT direct to HMRC rather than paying its supplier, to reduce the risk of VAT fraud by unscrupulous suppliers. A woman was recently arrested in Spain for being the financial mastermind behind a £1bn VAT fraud using non-existent mobile phones.

Explanation

Anchor accounts for the VAT direct to HMRC rather than paying its supplier, to reduce the risk of VAT fraud by unscrupulous suppliers. A woman was recently arrested in Spain for being the financial mastermind behind a £1bn VAT fraud using non-existent mobile phones.

3. What is Anchor's typical partial recovery rate on VAT?

0-5%

5-10%

20-25%

50%

The percentage usually depends on property sales. In the last VAT year to 31 May 2021 the average was 9.68%.

Explanation

The percentage usually depends on property sales. In the last VAT year to 31 May 2021 the average was 9.68%.

4. What is the most common rate of VAT on Anchor's purchases?

Exempt

Outside scope

Standard

Zero

85% of purchases are standard rated

Explanation

85% of purchases are standard rated

5. What is the VAT treatment of insurance and why?

Exempt - a different indirect tax is payable on insurance

Exempt - charities don't pay VAT on insurance

Outside scope - a different indirect tax is payable on insurance

Outside scope - insurance is compulsory, so not taxable

Standard - it's a normal service, so taxable

Insurance Premium Tax is paid on most insurance, at 12% or 20% depending on the insurance. Some specialist types of insurance are also exempt from IPT such as commercial ships and aircraft and long-term insurance.

Explanation

Insurance Premium Tax is paid on most insurance, at 12% or 20% depending on the insurance. Some specialist types of insurance are also exempt from IPT such as commercial ships and aircraft and long-term insurance.

6. Can Anchor's housing customers recover the VAT they pay on invoices with standard rated VAT?

Yes

No

Customers are the end consumer and can’t recover VAT they pay.

Customers in the Agresso sense such as a commercial business renting space could recover VAT if they make taxable supplies from the inputs Anchor charge them for.

Explanation

Customers are the end consumer and can’t recover VAT they pay.

Customers in the Agresso sense such as a commercial business renting space could recover VAT if they make taxable supplies from the inputs Anchor charge them for.

7. What is the VAT rate on Jaffa Cakes?

Exempt

Outside scope

Standard

Zero

Although chocolate covered, McVities convinced the court Jaffa Cakes are a cake because they go hard over time like a cake, not soft like a biscuit. HMRC tried to argue they were a finger snack, like a biscuit, unlike a cake slice, which can be eaten with a fork.

Explanation

Although chocolate covered, McVities convinced the court Jaffa Cakes are a cake because they go hard over time like a cake, not soft like a biscuit. HMRC tried to argue they were a finger snack, like a biscuit, unlike a cake slice, which can be eaten with a fork.

8. If a regular supplier stops charging VAT for VATable goods and services, what does Anchor need to do?

Nothing, it is the supplier’s responsibility to account for their own VAT

Report them to HMRC

Check with the supplier – there might be a valid reason

Keep adding VAT to what we pay them

It is possible to de-register for VAT if a company falls below £83,000 in taxable turnover, so our first step would be communication with the supplier.

Anchor has responsibilities under tax avoidance legislation to report potential VAT fraud to HMRC, which would include reporting suppliers to HMRC if Anchor pays them more than the £85,000 registration threshold.

Explanation

It is possible to de-register for VAT if a company falls below £83,000 in taxable turnover, so our first step would be communication with the supplier.

Anchor has responsibilities under tax avoidance legislation to report potential VAT fraud to HMRC, which would include reporting suppliers to HMRC if Anchor pays them more than the £85,000 registration threshold.

9. What is the most common rate of VAT on Anchor's sales?

Exempt

Outside scope

Standard

Zero

Rent and care fees are exempt from VAT, totalling 95.8% of sales.

Explanation

Rent and care fees are exempt from VAT, totalling 95.8% of sales.

10. How long are the VAT periods Anchor and its subsidiaries submit returns for (select all that apply)?

Four weeks

One month

Three months

One year

Returns must be submitted monthly or quarterly – most businesses submit quarterly.

Explanation

Returns must be submitted monthly or quarterly – most businesses submit quarterly.

Submit

11. What options are available to HMRC if Anchor make mistakes on their VAT return (select all that apply)?

A slap on the wrist (suspended penalty)

Penalty fines

Interest on unpaid amounts

Imprison Sarah Jones

All are possible – a suspended penalty (slap on the wrist) is the most common outcome as Anchor always self-reports errors it discovers, and doesn’t engage in dodgy tax avoidance schemes (see the tax strategy for more). Under the Corporate Criminal Offence legislation introduced in 2016, the senior officers of a company can face criminal prosecution resulting in a prison sentence if the company facilitates tax evasion.

Explanation

All are possible – a suspended penalty (slap on the wrist) is the most common outcome as Anchor always self-reports errors it discovers, and doesn’t engage in dodgy tax avoidance schemes (see the tax strategy for more). Under the Corporate Criminal Offence legislation introduced in 2016, the senior officers of a company can face criminal prosecution resulting in a prison sentence if the company facilitates tax evasion.

Submit

12. What VAT rates might be payable on a deposit (select all that apply)?

Exempt

Outside scope

Standard

Zero

A deposit is outside the scope if it is refundable. Where it reduces the end price payable, it simply follows the VAT treatment of the supply, so could have any VAT rate.

Explanation

A deposit is outside the scope if it is refundable. Where it reduces the end price payable, it simply follows the VAT treatment of the supply, so could have any VAT rate.

Submit