Timberlake Ltd, a partially exempt company for the purposes of value added tax (VAT), requires advice on simplifying the way in which it accounts for VAT.

-Timberlake Ltd is partially exempt for the purposes of VAT.

-Timberlake Ltds turnover for the year ended 31 March 2019 was 240,000 (VAT exclusive).

-Timberlake Ltds turnover for the year as a whole for VAT purposes comprised 86% taxable supplies and 14% exempt supplies.

-The input VAT suffered by Timberlake Ltd on expenditure during the year ended 31 March 2019 was:

Wholly attributable to taxable supplies 7,920

Wholly attributable to exempt supplies 1,062

Unattributable 4,150

Timberlake Ltd expects its turnover and expenditure figures to increase by approximately 25% next year.

The director of Timberlake heard about an annual test for computing the amount of recoverable input VAT during an accounting period and would like more information about this.

1. Determine, by reference to the de minimis tests 1 and 2, Timberlake Ltds recoverable input VAT for the year ended 31 March 2019. (15 marks)

2. Advise director of Timberlake Ltds eligibility for the annual test for computing the amount of recoverable input VAT for the year ending 31 March 2020 and the potential benefits to be gained from its use. (5 marks)

Total (20 marks)