Section B - ALL SIX questions are compulsory and MUST be attempted Please write your answers to all parts of these questions on the lined pages within the Candidate Answer Booklet. 1 Garfield has been registered for valued added tax (VAT) since 1 April 2008. Garfield has previously completed his VAT returns himself but for the quarter ended 31 March 2015 there are some items for which he is unsure of the comect VAT treatment Garfield's partly completed VAT computation for the quarter ended 31 March 2015 is shown below. Al of the completed sections of the computation are correct, with the omissions marked as outstanding iOS Note Output VAT Sales (all standard rated) 22.500 Discounted sale O/S Equipment O/S Fuel scale charge Input VAT Purchases (all standard rated) (11.2001 Motor car (purchased on 1 January 2015) Equipment Impairment losses Entertaining - UK customers - Overseas customers Motor expenses VAT payable Unless otherwise stated, all of the figures in the following notes are stated exclusive of VAT Note 1 - Discounted sale On 10 February 2015, a sales invoice for 4,300 was issued by Garfield in respect of a standard rated supply. To encourage this previously late paying customer to pay promptly. Garfield offered a 10% discount for payment within 14 days of the date of the sales invoice. The customer paid within the 14-day period This invoice has not been taken into account in calculating the output VAT figure of 22,500, and this is the only sale for which Garfield has offered a prompt payment discount Note 2 - Equipment During the quarter ended 31 March 2015, Garfield acquired some new equipment at a cost of 12,400 from a VAT registered supplier situated in the European Union Note 3 - Impairment losses On 31 March 2015, Garfield wrote off three impairment losses. Details are as follows: Amount Invoice date Payment due date 1,400 30 July 2014 29 August 2014 2,700 12 September 2014 12 October 2014 1,900 4 October 2014 3 November 2014 Note 4 - Entertaining During the quarter ended 31 March 2015, Garfield spent 960 on entertaining overseas customers. This figure is inclusive of VAT Note 5 - Motor expenses The motor car purchased on 1 January 2015 is used by Garfield 60% for business mileage. During the quarter ended 31 March 2015, Garfield spent 1,008 on repairs to the motor car and 660 on fuel for both his business and private mileage. Both of these figures are inclusive of VAT. Additional information Garfield does not use the cash accounting scheme, the annual accounting scheme or the flat rate scheme, but has read that the use of these schemes can be beneficial for small businesses such as his. Garfield's VAT exclusive annual turnover is currently 450,000, and this is expected to steadily decrease over the coming years. He pays for most of his purchases and expenses on a cash basis, but allows many of his customers 30 days credit when paying for sales. Required: (a) Calculate the amount of value added tax (VAT) payable by Garfield for the quarter ended 31 March 2015. (7 marks) (b) State which VAT schemes Garfield is currently permitted to use, and explain, with supporting reasons, which ONE of the available schemes would appear to be the most beneficial for him to use. Notes: 1. Your answer should be confined to the information given in the question. 2. You are not expected to explain how any of the schemes operate. (3 marks) (10 marks)