The following information relates to the VAT return of Toucan Ltd for the three months to 30 November 2017. All figures are VAT-exclusive unless stated otherwise.

(i) Standard-rated supplies made to customers were £28,800. A cash discount of 2.5%

was offered to customers who paid within 28 days and this discount was taken by customers who bought 50% of the supplies made during the quarter.

The figure of £28,800 includes a £1,600 sale made to a customer in September 2017. This customer went bankrupt in November 2017 and a bad debt of £1,600 was written off in the company's books on 30 November 2017.

On 15 November 2017, a customer was invoiced for £4,800 in relation to a sale of standard-rated goods. The customer paid for these goods on 4 December 20 17 and the goods were made available to the customer on 10 December 2017 . This sale is NOT included in the above figure of £28,800 and was NOT eligible for the 2.5%

cash discount.

(ii) Standard-rated goods bought for resale or consumption cost £9,280. Standard-rated services cost £5,200.

(iii) On 1 September 2017 , the company was charged VAT of £1,960 on the purchase of a motor car with emissions of 14 2g/km. Private use of this car by one of the company's employees accounts for 50% of its mileage. Maintenance charges in relation to the car were £280 for the quarter and fuel costs were £520. The company reclaims input tax on all car fuel.

(iv) In October 2017, the company bought a new non -current asset for a VAT-inclusive price of £14,100.

The company is now considering an application to join the flat -rate scheme for small businesses. Standard-rated sales are expected to run at £11,500 per month from now on and purchases of standard -rated items (other than non -current assets) on which VAT may be reclaimed are expected to be £5,500 per month. The company also anticipates the acquisition of a single non -current asset at a cost of £5,000 during 2018 . All of these figures exclude VAT. The flat-rate percentage applicable to Toucan Ltd is 9.5%.

Required:

(a) Compute the VAT payable to (or repayable by) HMRC for the three months to 30 November 2017.

(b) Explain the main features of the flat -rate scheme for small businesses. Would Toucan Ltd be eligible to join this scheme? If so, would it be beneficial for the company to join the scheme?