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Jana owns a shop selling newspapers (zero rated) and stationery
(standard rated). In her first year of trading to 31 July 2021, her sales of
newspapers were £3,050 per month and of stationery £2,250 per
month. In her second year of trading, these figures increased to £5,400
and £4,280, respectively.
State from what date Jana is liable to register for VAT.
Solution
Jana
Both newspapers and stationery are taxable supplies, so Jana must
register when her sales for the previous 12 months exceed the
registration threshold of £85,000.
In her first year, sales are £5,300 per month, so her turnover for the
year ended 31 July 2021, is £63,600. Thereafter, her sales are £9,680
per month, so each month she sells £4,380 more than one year ago.
Her cumulative turnover for the previous 12 months at each month end
thereafter is as follows:
Month end £
31 August 2021 67,980
30 September 2021 72,360
31 October 2021 76,740
30 November 2021 81,120
31 December 2021 85,500
Jana is liable to register at the end of December 2021 and she must
notify HMRC by 30 January 2022 and will be registered with effect from
1 February 2022, or an earlier date agreed with HMRC.Good day sir,I don’t understand why 4380 was used to calculate the registration treshold instead of 9680 for the second year.I’ll appreciate if you can explain better.
The total for registration is “rolling”
At the end of July 2021 her sales were 63,600
By the end of August the “rolling” total is 63,600 – 5,300 + 9680 = 67,980
Keep doing this each month until you hit the limit.The solution is using a short cut
You need twelve months profits.
At the end of July 2021 her sales were 63,600 – to find the “rolling” 12 months to the year ended 31st August 2021 you need to minus the profits for August 20 and add the profits for August 21, you roll the twelve month total over each month – deducting and adding.
By the end of August the “rolling” total is 63,600 – 5,300 + 9680 = 67,980
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