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| Special scheme Vanessa Serve is registered for value added tax (VAT), and is in the process of completing her VAT return for the quarter ended 31 March 2007. The following information is available: (1) Sales invoices totalling £18,000 were issued in respect of standard rated sales. All of Vanessa’s customers are members of the general public. (2) During the quarter ended 31 March 2007 Vanessa spent £600 on mobile telephone calls, of which 40% related to private calls. (3) On 3 January 2007 Vanessa purchased a motor car for £12,000. On 18 March 2007 £987 was spent on repairs to the motor car. The motor car is used by Vanessa in her business, although approximately 10% of the mileage is for private journeys. Both figures are inclusive of VAT at the standard rate. (4) On 29 March 2007 tennis coaching equipment was purchased for £1,760. Vanessa paid for the equipment on this date, but did not take delivery of the equipment or receive an invoice until 3 April 2007. This purchase was standard rated. (5) In addition to the above, Vanessa also had other standard rated expenses amounting to £2,200 in the quarter ended 31 March 2007. This figure includes £400 for entertaining customers. Required: (i) Calculate the amount of VAT payable by Vanessa for the quarter ended 31 March 2007.(ii) Advise Vanessa of the conditions that she must satisfy before being permitted to use the VAT flat rate scheme, and the advantages of joining the scheme. The relevant flat rate scheme percentage for Vanessa’s trade as notified by HM Revenue and Customs is 6%. |