Chapter 8 - Value added tax and corporation tax

Question 1

Blue Consulting Ltd’s CEO is Petra. She has assembled a team of eight company directors who own 100% of the shares. This is known as a[n]:

Select one:

a. enterprise investment scheme.
b. close company.
c. public company.
d. investment company.

Answer 1

b. close company.

chapter reference 8B7

Question 2

To qualify for the flat rate scheme for calculating VAT, a business must have an annual taxable turnover of no more than what amount, EXCLUDING VAT?

Select one:

a. £100,000.
b. £150,000.
c. £200,000.
d. £175,000.

Answer 2

b. £150,000.

chapter reference 8A3C

Question 3

Tradeworth Ltd has been advised that it can elect to complete an annual VAT return. This means that:

Select one:

a. its taxable supplies are £1,350,000 a year or less.
b. it will pay the VAT due in 12 monthly instalments.
c. it will pay the VAT due at the end of the year.
d. its taxable supplies are greater than £1,350,000 in a year.

Answer 3

a. its taxable supplies are £1,350,000 a year or less.

chapter reference 8A3A

Question 4

Sian runs her own limited business and has decided to voluntarily register for VAT. The most likely reason for this is that she can:

Select one:

a. claim output tax on her purchases.
b. claim input tax on her purchases.
c. use VAT to reduce her corporation tax liability.
d. use VAT to reduce her income tax liability.

Answer 4

b. claim input tax on her purchases.

chapter reference 8A1B

Question 5

Vsmart Ltd expect to make a profit of £2 million during their current accounting period which ends 31 March 2022. What will be their corporation tax liability in 2021/22?

Select one:

a. £420,000.
b. £400,000.
c. £385,000.
d. £380,000.

Correct, chapter reference 8B1A

Answer 5

d. £380,000.

chapter reference 8B1A

Question 6

Registered traders will typically submit VAT returns and pay any VAT due every:

Select one:

a. month.
b. year.
c. six months.
d. three months.

Answer 6

d. three months.

chapter reference 8A4A

Question 7

Small businesses may be able to reclaim some or all of their input VAT even if their supplies are exempt, provided the input VAT attributable to the exempt supplies is no more than half the total input VAT. In addition, the total value of its exempt input VAT must NOT average more than what maximum amount per year?

Select one:

a. £5,000.
b. £10,000.
c. £12,500.
d. £7,500.

Answer 7

d. £7,500.

chapter reference 8A2E

Question 8

XYZ plc made a trading loss in the year ended 31 March 2022. What is the latest date by which the company must have claimed loss relief?

Select one:

a. 31 March 2024.
b. 31 March 2023.
c. 5 April 2023.
d. 5 April 2024.

Answer 8

a. 31 March 2024.

chapter reference 8B2

Question 9

Dolomite Ltd made trading profits of £120,000 and a chargeable capital gain of £60,000 from the sale of a machine. What tax or taxes are paid by the company in the 2021/22 tax year?

Select one:

a. Income tax of £22,800 on the profit, and capital gains tax of £13,524 on the chargeable gain.
b. Income tax of £24,000 on the profit, and corporation tax of £12,000 on the chargeable gain.
c. Corporation tax of £34,200 in total on both the profit and the chargeable gain.
d. Corporation tax of £22,800 on the profit, and capital gains tax of £11,400 on the chargeable gain.

Answer 9

c. Corporation tax of £34,200 in total on both the profit and the chargeable gain.

chapter reference 8B1/8B1A

Question 10

BeSmart Ltd made a profit of £1,230,000, received £7,000 in income from investments, and realised gains of £70,000 from a property disposal. If their current accounting period ends 31 March 2022, what will be their corporation tax liability in 2021/22?

Select one:

a. £233,700.
b. £247,000.
c. £248,330.
d. £235,030.

Answer 10

c. £248,330.

chapter reference 8B1A

Question 11

Boris has just paid his domestic gas bill which is £800 excluding VAT. How much VAT would he have paid on it?

Select one:

a. £160.
b. £80.
c. £120.
d. £40.

Answer 11

d. £40.

chapter reference 8A2C

Question 12

If a company makes a chargeable gain having bought and sold a property in the current tax year, how are these profits taxed?

Select one:

a. They qualify for business asset disposal relief and any unrelieved amount is then subject to corporation tax.
b. An annual exemption is applied and any gains over this are then subject to corporation tax.
c. An indexation allowance may be applied on the full gain and is then subject to corporation tax.
d. They are subject to corporation tax.

Answer 12

d. They are subject to corporation tax.

chapter reference 8B3

Question 13

How much VAT will be applied to £1,000 of children’s clothes, a £1,000 insurance premium and a £1,000 laptop?

Select one:

a. Children’s clothes and the laptop are zero-rated; the insurance premium is VAT exempt.
b. Children’s clothes are zero-rated, £200 VAT each on the price of a laptop and on the insurance premium.
c. Children’s clothes are zero-rated, the insurance premium is VAT exempt and £200 VAT on the price of a laptop.
d. Insurance premium and children’s clothes are zero-rated, and £200 VAT on the price of a laptop.

Answer 13

c. Children’s clothes are zero-rated, the insurance premium is VAT exempt and £200 VAT on the price of a laptop.

chapter reference 8A2A/B/D

Question 14

Brian and Geoff are both self-employed. In this financial year, Brian has taxable supplies of £103,000 and profits of £70,000, whilst Geoff has taxable supplies of £90,000 with profits of £80,000. Which of them, if either, must register for VAT?

Select one:

a. Geoff only.
b. Neither Brian nor Geoff.
c. Brian only.
d. Both Brian and Geoff.

Correct, chapter reference 8A1B

Answer 14

d. Both Brian and Geoff.

chapter reference 8A1B

Question 15

All of these are examples of zero-rated VAT supplies, APART from:

Select one:

a. cremation services.
b. medicines.
c. public transport.
d. books.

Answer 15

a. cremation services.

chapter reference 8A2B

Question 16

ABB Ltd’s current accounting period runs from 1 January 2021 to 31 March 2022. On what accounting periods will corporation tax be charged?

Select one:

a. From 1 January 2021 to 31 December 2021 followed by 1 January 2022 to 31 March 2022.
b. From 1 January 2021 to 31 September 2021 followed by 1 October 2021 to 31 March 2022.
c. From 1 January 2021 to 31 March 2022.
d. From 1 January 2021 to 31 March 2021 followed by 1 April 2021 to 31 March 2022.

Answer 16

a. From 1 January 2021 to 31 December 2021 followed by 1 January 2022 to 31 March 2022.

chapter reference 8B1B

Question 17

A small company made a profit of £100,000 for their accounting period ending on 30 June 2021. What is the company’s corporation tax liability and when must this be paid?

Select one:

a. £19,000 corporation tax which is due no later no later than 31 December 2022.
b. £20,000 corporation tax which is due no later 31 December 2022.
c. £19,000 corporation tax which is due no later than 1 April 2022.
d. £20,000 corporation tax which is due no later than 1 April 2022.

Answer 17

c. £19,000 corporation tax which is due no later than 1 April 2022.

chapter reference 8B4A

Question 18

What expenses can be deducted from a company’s profits when calculating corporation tax?

Select one:

a. Depreciation on buildings.
b. Entertaining expenses.
c. Depreciation on plant and machinery.
d. Charitable donations.

Answer 18

d. Charitable donations.

chapter reference 8B1C

Question 19

Donna provides management consultancy services and is registered for VAT. If her fees are £6,750, how much would she invoice including VAT?

Select one:

a. £7,762.50.
b. £7,931.
c. £8,100.
d. £8,268.75.

Answer 19

c. £8,100.

chapter reference 8A1A

Question 20

Alfie works for a firm that provides goods and services that are exempt from VAT. He works for a[n]:

Select one:

a. bank.
b. installation firm providing energy-saving materials.
c. domestic fuel company.
d. contraceptive products manufacturer.

Answer 20

a. bank.

chapter reference 8A1A

Question 21

Haywood Ltd has profits assessable to corporation tax of £280,000 in the 2021 financial year. The rate used to calculate the tax owed will be:

Select one:

a. 21%.
b. 19%.
c. 20%.
d. 22%.

Answer 21

b. 19%.

chapter reference 8B1A

Question 22

Folly plc made a profit of £1m during their current accounting period, which runs from 1 April 2021 to 31 March 2022. Folly plc’s corporation tax liability for the 2021 financial year will be:

Select one:

a. £210,000.
b. £170,000.
c. £200,000.
d. £190,000.

Answer 22

d. £190,000.

chapter reference 8B1A

Question 23

ABC Holdings Ltd is incorporated in Iceland, but the company will be UK resident for tax purposes if:

Select one:

a. the directors elect for this to be the case.
b. all of its directors are resident in the UK for tax purposes.
c. ABC Holdings is a parent company.
d. central management and control of the company takes place in the UK.

Answer 23

d. central management and control of the company takes place in the UK.

chapter reference 8B8

Question 24

Quick-In Limited import goods from outside the EU on a regular basis. When must they pay the tax due on these goods?

Select one:

a. At the time of importing them, unless special arrangements exist.
b. At the end of each quarter.
c. At the end of every month.
d. Once the goods have been sold.

Answer 24

a. At the time of importing them, unless special arrangements exist.

chapter reference 8A5

Question 25

ABC Limited has trading profits of £1.2m. If its accounting period ends on 5 April 2022, what is the latest date that ABC can pay its corporation tax?

Select one:

a. 6 January 2023.
b. 5 April 2023.
c. 31 December 2022.
d. 5 July 2022.

Answer 25

a. 6 January 2023.

chapter reference 8B4A

Question 26

Before any VAT, Samantha spends £60 on shoes and clothes for her grandchild, £600 on domestic fuel for her home heating system, and £400 to the crematorium for her mother’s funeral. How much VAT will she pay on these items?

Select one:

a. £120.
b. £30.
c. £200.
d. £212.

Answer 26

b. £30.

chapter reference 8A2B/ 8A2C/ 8A2D