Nathaniel Norton started a new business manufacturing wooden toys on 1 May 2019.
If registered for value added tax (VAT), his sales would be standard rated supplies.
You have received the following email from Nathaniel:
“I am not sure whether I should have already contacted HMRC with regard to registering
for VAT and whether I should be charging VAT on my invoices.
I don’t think that I am earning enough profits yet, but a friend I met at a party last night
thought I might need to register. I think that I pay too much tax already so I do not want
to register for VAT if I don’t have to.
My friend also mentioned something about some small business schemes for VAT that
may help me.”
From the information you have today (14 May 2020), you think that Nathaniel should
have registered for VAT on 1 December 2019, and you have told him that he must do
so as soon as possible.
Required:
(a) Explain the tax consequences of Nathaniel choosing to register for VAT
immediately, or choosing not to register for VAT.
Describe any ethical issues that arise if Nataniel refuses to register for VAT despite
your advice, and explain how you should deal with the situation.
(6 marks)
(b) Critically appraise the usefulness of the small business VAT schemes available
for Nathaniel’s business.
(9 marks)
Total marks: (15 marks)