Chapter 7 - Value of Supply

Question 1

Consideration Wholly in Money

Answer 1

Gross value of supply, or VAT inclusive value, is the value of the consideration given for it.
Consideration = price of item +VAT
120% = 100% + 20%
6 = 5 + 1
5/6 of consideration is net price, 1/6 is the VAT

Question 2

Prompt Payment Discount

Answer 2

Sometimes a discount is offered if the payment is made quickly. VAT can only be calculated on the discounted amount when the customer pays within the retired time scale. If the supplier doesn’t know if the customer will pay early, VAT must be charged on the full amount and shown on the invoice. Invoice must also show the rate of discount offered.

Question 3

PPD

Answer 3

If the discount is used, one of two adjustments should be made:

1) supplier issues a credit note; or
2) the invoice must include the terms of the discount, the timescale and a statement that the customer can only recover s input tax the VAT paid to the supplier

Question 4

Single and Multiple Supplies

Answer 4

Multiple supply is where the individual elements within the supply that are treated separately for VAT.

Single supply is where there is just one supply although it could be made up of multiple things.

With multiple supply, there is a need to perform an apportionment calc to split the individual elements of the supply in order to calculate the VAT due. With single rate, on rate of VAT applies to the full supply