Michael Murray is the owner and managing director of Maple Leafs Boutique Ltd, a UK registered company that manufactures and retails luxury clothing for adults and children. The company has retail outlets in London (UK), Manchester (UK) and Edinburgh (UK). Part of each retail outlet is leased to Skin Beauty Care Ltd, a UK registered company that provides luxury beauty products: each lease was granted in 2018 and will expire in 2023.
The company is registered for VAT and has been trading for many years. Maple Leafs Boutique Ltd has always been profitable.
The following information is available for the quarter ended 31 December 2020. All figures are exclusive of VAT:
- Sales invoices totalling £710,000 were issued during the quarter in respect of credit sales of luxury clothing for adults. These sales were all standard rated. Michael offers all of Maple Leafs Boutique Ltd’s wholesale customers a 5.5% discount for payment within one month of the date of the sales invoice. Ninety percent of wholesale customers pay within this period. The sales figure of £710,000 is stated before deduction of the 5.5% discount.
- Cash sales amounted to £670,000, of which £409,000 was in respect of the sale of luxury clothing for adults, all of which were standard rated sales. £201,000 was in respect of luxury clothing for children, all of which were zero rated. Maple Leafs Boutique Ltd also received £60,000 rental income from Skin Beauty Care Ltd during the quarter.
- Purchase and expense invoices totalling £1,180,400 (exclusive of VAT) were received from VAT registered suppliers. This figure comprised the following:
|
(£) |
|
|
Standard rated purchases and expenses |
860,250 |
|
Zero rated purchases |
313,140 |
|
Exempt expenses |
7,010 |
- Input tax on purchases and expenses was suffered as follows:
|
(£) |
|
|
Attributed to taxable supplies |
140,041 |
|
Attributed to exempt supplies |
28,009 |
|
Unattributed |
4,000 |
Required:
- Calculate the amount of VAT payable by/repayable to Maple Leafs Boutique Ltd for the quarter ended 31 December 2020. Michael Murray wishes to reclaim any residual input tax that is attributable to taxable supplies. He uses the standard method to compute the reclaimable element of any residual input tax. (51 marks)
