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Question part b (warehouse),
Can someone help me to explain where is 1/10 and 7/10 comes from?
I’m currently based on self study and struggled on this question part.
It might sound stupid but I really don’t understand when I read the answer.
Many thanks.
Hi, I believe its to do with the capital goods scheme.
It is relevant where a partially exempt business buys a building for more than £250,000 and there is a change in the partial exemption % during the 10 year adjustment period.
Here the recoverable input VAT drops from 70% to 55% then 50%, so Viola Ltd has to pay back some of the input VAT initially reclaimed.
There is also a final adjustment in the year of disposal for the reminder of the 10 year adjustment period – i.e. 7/10, 7 years remaining in scheme.
I hope this helps
Dorian
Hi Dorian,
Thank you very much!
It is a clear answer and I finally found the rules regarding capital goods scheme.
Good luck on your exams and every success!
Karen
Cool answer. Though this explanation is not given in kaplan kit though it explains most of such issues.
for one-on-one discussion:
bassaniobroke@gmail.comIn regards to Capital Goods Scheme:
If you’re a VAT-registered trader and you acquire or create an expensive capital asset, or you have one when you first register for VAT, you may have to use the Capital Goods Scheme to make adjustments, over several years, to how much VAT you initially reclaimed on the asset. The scheme applies when you spend, net of VAT:
£250,000 or more on land, buildings, or civil engineering works
£50,000 or more on a single computer or piece of computer equipment
£50,000 or more on an aircraft, ship, boat or other vessel
If your business has an asset and the extent to which you use it to make taxable supplies varies over the Capital Goods Scheme adjustment period (up to ten years depending on the asset), you’ll have to adjust the amount of VAT you reclaimed. You can reclaim more if the proportion of your taxable supplies increases, but you’ll have to repay some if it decreases.
Your taxable supplies are your sales that you make which are standard, reduced or zero-rated.
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