Answer to Question #83962 in Accounting for Jay

Question

Shanahan Ltd is registered for VAT and is partially exempt. During the year the company
incurred input tax of £136,000. Of this, £100,000 was attributable to taxable supplies,
£13,000 was attributable to exempt supplies and £23,000 was unattributable. The total
VAT exclusive value of supplies made by Shanahan Ltd for the year was £975,000.
£100,000 of the £975,000 was in respect of zero rated supplies. £80,000 of the £975,000
was from exempt supplies. How much of Shanahan Ltd’s input tax is recoverable?

Answer 1

Percentage of taxable supplies:

£100,000/£136,000=73.5%

Percentage of unattributable to exempt supplies:

£23,000/£136,000=16.9%

Amount of tax recoverable:

(Total supplies-Exempted supplies)*% of recoverable tax

795,000*73.5%+100,000*16.9%=£601,236