[2010] UKFTT 64 (TC)

TC00376

Appeal number TC/2009/11526

VALUE ADDED TAX — flat-rate scheme — application for back-dated entry — reason for application greater amount of tax paid under standard method of accounting — application refused — whether discretion properly exercised — yes — appeal dismissed

First-tier tribunal

tax

DAVID LESLIE SKINNER trading as DLS PACKAGING

Appellant

– and –

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS

Respondents

                   Tribunal :  Judge Colin Bishopp

                                      Marilyn Crompton

Sitting in public in Manchester on 9 February 2010

The Appellant in person

Mrs Kim Tilling of their solicitor’s office for the Respondents

© CROWN COPYRIGHT 2010

Decision

1. This is an appeal by Mr D L Skinner, who trades as DLS Packaging, against the Commissioners’ refusal of his application that his entry into the flat-rate accounting scheme be back-dated to 2003. Mr Skinner became registered for VAT on 27 November 1990, and accounted thereafter for VAT in the standard way. He applied for entry to the flat-rate scheme in March 2009; after some enquiries into his eligibility to join the scheme the Commissioners granted the application with effect from 1 January 2009, that being the beginning of the accounting period within which the application was made. They refused his application for retrospective entry on the grounds that exceptional reasons had not been made out. Mr Skinner’s request was based upon his having paid substantially more in tax by using the standard method than he would have paid had he used the flat-rate scheme. He added that he considered that HMRC should have advised him that he was paying more tax than he need have done. The decision to refuse his application for retrospective entry was upheld on review.

2. The scheme is provided for by s 26B of the Value Added Tax Act 1994, which came into force on 24 April 2002. It allows a trader eligible to use the scheme—in broad terms, a trader with limited turnover—to account for tax by paying a prescribed percentage of his turnover, significantly lower than the standard rate of VAT (in the case of packaging it is 7.5%) , though upon the basis that, with some exceptions, the trader ceases to be eligible for credit for the input tax he has incurred. Regulations 55A to 55V of the Value Added Tax Regulations 1995 provide for the detail of the scheme. Regulation 55B(1), as it was in force at the material time, read as follows:

“The Commissioners may, subject to the requirements of this Part, authorise a taxable person to account for and pay VAT in respect of his relevant supplies in accordance with the scheme with effect from—

(a)     the beginning of his next prescribed accounting period after the date on which the Commissioners are notified of his desire to be so authorised, or

(b)     such earlier or later date as may be agreed between him and the Commissioners ….”

3. It is apparent from the foregoing that the Commissioners did agree to some limited back-dating, to the start of the period during which the application was made rather than from the start of the next accounting period, as reg 55B(1)(a) indicates would be the usual start date, but they were unwilling to go further. Their reason was that the flat-rate scheme is not designed to minimise a taxable person’s liability to pay tax, but to relieve small traders of the burden of detailed accounting for VAT; its application to periods for which a trader has already accounted is therefore not consistent with its purpose. Limited back-dating to 1 January 2009 was permissible because Mr Skinner had not accounted in respect of that period. Only in exceptional circumstances would a trader be admitted to the scheme in respect of periods for which he had already accounted. Quite what might be regarded as exceptional circumstances was not identified.

4. The same reasoning was considered by Henderson J in the similar case of Revenue and Customs Commissioners v Burke [2009] EWHC 2587 (Ch) in which he said, at [25], “I comment that this appears to me to be an entirely rational policy, which reflects the simplification policy of the flat-rate scheme itself.” We respectfully agree. As Henderson J also pointed out, the tribunal’s jurisdiction is limited to deciding whether the Commissioners’ exercise of their discretion was so unreasonable that it must be set aside. In our view it was entirely reasonable, and there is no possible basis on which we could properly interfere.

5. As we have indicated, Mr Skinner advanced the additional argument that the Commissioners should have advised him that he was paying more tax than he needed to pay because of his failure to apply for admission to the scheme, with the inference that this was a special circumstance supporting his application for back-dating. There is, to put it at its lowest, considerable doubt whether the Commissioners have any duty to advise traders in that way, beyond publicising the availability of the scheme, but even if there is, as we indicated to Mr Skinner at the hearing, it is not a matter within this tribunal’s jurisdiction but one he should take up with the Revenue Adjudicator.

6. As we cannot interfere with the Commissioners’ decision, the appeal must be dismissed.

Colin Bishopp

Tribunal Judge

Date of release: 11 February 2010

Note: These are full reasons for the decision. Any party dissatisfied by this decision may apply for permission to appeal to the Upper Tribunal. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.