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问答题Ellroy started an unincorporated business on 1 October 2012. He requires advice on his choice of accounting date, a possible change of accounting date and the use of the flat rate scheme for the purposes of VAT (value added tax). The following information has been obtained from telephone conversations with Ellroy. Ellroy: - Is 47 years old. - Is considering either a 31 March or a 30 September year end in 2013 and future years for his new business. - Receives a share of profits from a partnership of more than ￡50,000 per year. The budgeted trading profits of the business: - It should be assumed that the profits set out below will accrue evenly in each trading period. - The profits before deduction of capital allowances but after all other tax adjustments have been made are: ￡ Six months ending 31 March 2013 13,100 Year ending 31 March 2014 87,200 Year ending 31 March 2015 74,400 - Ellroy's only capital expenditure will be the purchase of three vans at a total cost of ￡32,000 in June 2013. The VAT position of the business: - The budgeted annual turnover and expenses of the fully established business are: ￡ Turnover (all standard rated) 100,000 Expenses: standard rated 21,000 zero rated 3,000 outside the scope of VAT 5,000 - All the figures exclude VAT. Required (a) (i) Calculate the difference in the total income tax and national insurance that will be payable by Ellroy for the first three tax years of the business depending on whether he adopts a 31 March or 30 September year end. (ii) Explain the tax implications, including the effect on Ellroy's taxable profits for 2015/16 if, having initially adopted a 31 March year end, he were to change his accounting date and prepare accounts for the six months ending 30 September 2015. You should consider the possibility of both rising and falling levels of profitability. (b) Explain, by reference to the budgeted annual turnover and expenses of the fully established business and with the aid of supporting calculations, the maximum flat rate percentage that can apply to Ellroy's business such that it would be financially beneficial for him to join the flat rate scheme. Note: you should ignore the 1% discount for the first 12 months of registration. You should assume that the tax rates and allowances for the tax year 2011/12 will continue to apply for the foreseeable future.
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