[2010] UKFTT 73 (TC)

TC00386

Appeal number LON/2008/2187

VAT – three-year “capping” limitation – Flat Rate Scheme – Appellant given retrospective date to join Flat Rate Scheme – claim to recover overpaid VAT – whether three-year “cap” applied to limit period of claim – whether Appellant prevented from exercising Community law rights on grounds he could not know the correct business category for his business activities for purposes of Flat Rate Scheme – no – section 80 VATA 1994 – appeal dismissed

FIRST-TIER TRIBUNAL

TAX 

	CHRISTOPHER JOHN SIMS	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS (VAT)	Respondents

TRIBUNAL: 	JUDGE EDWARD SADLER
						MICHAEL BELL ACA CTA

Sitting in public in London on 9 November 2009

The Appellant appeared in person

Mr Sarabjit Singh, counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2010

DECISION
Introduction
1.	This is an appeal by Mr Christopher John Sims (“the Appellant”) against a decision by The Commissioners for Her Majesty’s Revenue and Customs (“the Commissioners”) in their letter of 23 September 2008 to the Appellant to refuse to repay the Appellant VAT in the sum of £8,403.60.  The Appellant claims that, for his VAT quarterly accounting periods 06/02 to 06/05, he overpaid this amount of VAT: he argues that he is to be treated as being within the so-called Flat-rate Scheme for small businesses for accounting for VAT during those periods, but that since for those periods he actually accounted for VAT in accordance with the normal invoiced based method he paid more VAT than was due.
2.	The Commissioners do not necessarily accept that the Appellant is to be treated as being within the Flat-rate Scheme for those quarterly accounting periods, but in any event they refuse to make the repayment claimed by the Appellant on the grounds that those periods fall beyond the three-year limitation or “capping” period relating to claims for overpaid VAT, as provided in section 80(4) of the Value Added Tax Act 1994 (“VATA 1994”).
3.	This case is concerned solely with the issue of whether the statutory capping provisions apply in the circumstances of the Appellant.  The Commissioners have acted on the basis that the Appellant is to be treated, retrospectively, as being within the Flat-rate Scheme at least since 1 April 2005, and have made a repayment of VAT to the Appellant (totalling £8,716) to take account of that 1 April 2005 start date (that repayment relates back no further than to the 09/05 quarter as a consequence of the Commissioners applying the cap).  If the Appellant is ultimately successful in his appeal on the capping point the Commissioners will then decide whether the Appellant is properly to be treated as being within the Flat-rate Scheme either as from 1 April 2005 or as from April 2002 (when that Scheme was introduced) – that is a matter of applying the relevant regulations to the circumstances of the Appellant, including his annual turnover at various dates, and the agreement which is to be ascertained from the extensive correspondence between the Commissioners and the Appellant as to the start date.  The Commissioners have specifically reserved their position on this point, maintaining that the proper application of their policy precludes, in the circumstances of the Appellant, a retrospective start date for his entry into the Scheme.  For the present they are not prepared to go beyond what they regard as a concession already made in contravention of that policy in treating the Appellant as being entitled to join the Scheme as from 1 April 2005. We are not concerned with that matter, however, and make no decision on the point.
4.	The Appellant’s first argument is that, in his particular circumstance, he could not reasonably have known that the Flat-rate Scheme applied to him to his benefit until a time by which the three-year statutory capping provision took effect to restrict his right to recover all the VAT he had overpaid (that is to say, the VAT he would not have paid had he been in the Scheme from the outset).  This being so, he was prevented, by the capping provision, from exercising his Community law rights to recover overpaid tax, which is contrary to the general Community law principle of effectiveness.  The capping provision should therefore be disregarded so that his directly effective Community law rights are available to him and are given effect to.  The Appellant’s second argument concerns the construction of the capping provisions and the date from which they should apply.
5.	The Commissioners argue that the Appellant has not made any overpayment of VAT, and therefore has no right to recover any amount: no Community law right has therefore been rendered impossible to exercise by reason of the statutory cap.  In any event, they argue, case law establishes that the application of the statutory cap to any right the Appellant may have to claim recovery of overpaid tax does not breach the principle of effectiveness.  They dismiss the Appellant’s construction of the capping provisions as a misreading of the legislation.
6.	Our decision, for the reasons given below, is that the Appellant’s claim to have the statutory cap set aside fails.  We also consider that his construction of the capping provisions is misconceived.  The Appellant’s appeal is therefore dismissed.
The evidence and the facts
7.	By way of evidence we had two bundles of documents, comprising the VAT registration documents of the Appellant and the confirmation given by the Commissioners that the Appellant had entered the Flat-rate Scheme; the correspondence between the Appellant and the Commissioners with respect to the Appellant’s application to join the Flat-rate Scheme; and various published documents relating to the introduction of the Flat-rate Scheme and versions of the Commissioners’ Notices on the Scheme.  We also heard evidence from the Appellant in the course of his presentation of his case.  There were no witnesses called by the Commissioners.
8.	The facts in this case are not in dispute between the parties.
9.	 The Appellant is a chartered electronics engineer who is a sole proprietor carrying on the business of the design and installation of broadcast systems for television, radio and video studios which includes the design and supply of computer software and also the design, construction, supply and installation of related equipment.
10.	The Appellant registered for VAT on 1 June 1993.  He was registered with the trade classification “8653 – computer services”.
11.	The Appellant was aware that that trade classification did not accurately describe the nature of the Appellant’s business since an important part of that business is the design, supply and installation of specialist broadcast systems equipment (such as electronic circuit boards) which runs the software designed and supplied by the Appellant (and also software designed and supplied by others).  The Appellant discussed this matter at the time of registration and subsequently, and in particular at the time of a visit by an officer of the Commissioners in November 1997.  As a result of that visit an amended certificate of registration was issued on 17 November 1997 showing the trade classification under which the Appellant is registered as “72200 – software consultancy and supply”.  It was acknowledged at that time that this remained an inaccurate description of the Appellant’s business, but that no other trade classification at that time better encompassed the nature of the Appellant’s business activity.  
12.	The Appellant submitted his VAT return using the normal invoice based accounting method, and continued to do so following the introduction of the Flat-rate Scheme on 25 April 2002.
13.	The Flat-rate Scheme allows taxpayers with an annual turnover expected not to exceed £100,000 (£150,000 since April 2003) to pay VAT on an alternative basis to the normal invoice method (whereby VAT on input supplies is deducted from VAT on output supplies and the difference paid to the Commissioners).  Taxpayers within the Flat-rate Scheme instead pay VAT calculated on a specified percentage of their “relevant turnover” (being the value of supplies made plus the VAT chargeable on those supplies which are subject to VAT).  The specified percentage applicable to any trader within the Flat-rate Scheme is determined by reference to a table of categories of businesses, with the trader applying the percentage listed as appropriate to the category of business that he is expected to carry on (or the business category that accords with his main business activity if he is expected to carry on business in more than one business category).
14.	The specified business categories for the purposes of the Flat-rate Scheme do not directly accord with the trade classifications used for VAT registration purposes, and the number of trade classifications far exceeds the number of Flat-rate Scheme business categories, which are more broadly defined.
15.	For the purposes of the Flat-rate Scheme the business category “Computer and IT consultancy or data processing” has an appropriate percentage of 11.5 and the business category “Any other activity not listed elsewhere” has an appropriate percentage of 9 (10 before 1 December 2008).
16.	Although there may be some dispute in the matter as to the actual facts, and we were not asked or required to decide the point, it is assumed for the purposes of this case that at all times since the introduction of the Flat-rate Scheme the turnover of the Appellant was such as to make him eligible to join the Scheme at its introduction or at any time subsequently. 
17.	On 31 October 2007 the Appellant telephoned the National Advice Service of the Commissioners to say that he considered himself to be eligible to join the Flat-rate Scheme as his turnover was less than £150,000.  His concern was that none of the business categories accorded with the nature of his business and therefore he could not determine the appropriate percentage which should be applied to his turnover.  He was advised that he might, in such circumstances, be in the “Any other activity not listed elsewhere” category.  He was also advised that he could not apply the Flat-rate Scheme retrospectively, that is, for periods prior to his application to join the Scheme.  He was advised to call the Commissioners’ team operating the Flat-rate Scheme if he continued to be concerned about his business category.
18.	On 1 November 2007 the Appellant called the National Advice Service again, on this occasion to apply to join the Flat-rate Scheme.  Again there was discussion of the difficulty of fitting the Appellant’s business activity into a specific business category to determine the appropriate percentage, the Appellant expressing his concern that his trade classification for VAT registration purposes did not accord with his actual business activity.  It was made clear to the Appellant that the choice of business category was a matter for him, but that if his business did not fit within a specific business category he was entitled to join the Flat-rate Scheme with the business category “Any other activity not listed elsewhere”.  The Appellant decided to apply to join the Flat-rate Scheme on that basis.  The Appellant asked that the start date for his joining the Flat-rate Scheme should be 1 January 2008 (he was advised that the earliest date would be 1 October 2007, the beginning of the VAT quarter in which the application was made).  As a result of that conversation an application form was generated by computer showing the business category of the Appellant to be “Any other activity not listed elsewhere”, giving an appropriate percentage rate of 10, and a start date of 1 January 2008.
19.	On 7 November the Commissioners authorised the Appellant to use the Flat-rate Scheme with effect from 1 July 2007 (apparently disregarding the Appellant’s requested start date, and, as the Commissioners stated in subsequent correspondence, dating it back to the start of the previous quarterly accounting period since at the time of authorisation the Appellant had not yet submitted his VAT return for his 09/07 quarter).
20.	On 21 November 2007 the Appellant wrote to the Commissioners’ Flat Rate Unit in Grimsby to request that he should be treated as retrospectively entitled to join the Flat-rate Scheme with effect from its introduction in April 2002.  His grounds for such request were that he had not considered that the Flat-rate Scheme was beneficial to him since his VAT registration trade classification led him to believe that he would necessarily be placed in a business category for the purposes of the Scheme with a higher percentage rate than that for the “Any other activity not listed elsewhere” category to which he now understood he was entitled to be allocated.
21.	On 24 January 2008 the Commissioners wrote to the Appellant refusing to give a retrospective start date for the Appellant to join the Flat-rate Scheme, stating that although the Commissioners have power to agree a retrospective start date, it is their policy not to do so where the business has already calculated its VAT liability using normal accounting procedures, since in such cases a retrospective start date would not have the effect for past periods of simplifying the VAT accounting and record-keeping burden on small businesses, which is the rationale for the Flat-rate Scheme.  They stated that exceptional circumstances may justify them agreeing to a retrospective start date, but the fact that it would result in the taxpayer paying less VAT is not in itself an exceptional circumstance.
22.	On 5 February 2008 the Appellant wrote to the Commissioners asking for a reconsideration of his request for a start date of April 2002 for entry into the Flat-rate Scheme.  His grounds were that the Commissioners had excluded him from the Scheme by not explaining that his VAT registration trade classification (which itself had been a matter of discussion with the Commissioners) was not relevant in determining the appropriate business category for the Appellant in applying the Scheme.
23.	Further correspondence ensued between the Appellant and the Commissioners, and the matter was reviewed by the Commissioners’ Appeals and Reconsiderations unit.  The Appellant was informed on 31 March 2008 that his application for backdating his entry into the Flat-rate Scheme to April 2002 had been accepted.  This was followed by a further letter from the Appeals and Reconsiderations unit dated 2 April 2008 referring to the 31 March 2008 letter and stating that “any subsequent application that you may make to reclaim overpaid VAT will be subject to the three year capping regulations”; and that the relevant office would contact the Appellant with a view to identifying an appropriate date for his entry into the Scheme.  
24.	The Appellant was advised by the Commissioners on 3 April that, having regard to the three year capping regulations, his start date for the Scheme would be 1 April 2005, and that if VAT had been overpaid he could reclaim it by subtracting it from the VAT due in his next return (if the amount due was under £10,000), or by making a voluntary disclosure.
25.	The Appellant then asked the officer concerned at the Commissioners’ Appeals and Reconsiderations unit to explain why he had agreed to a retrospective entry date into the scheme – the Appellant’s purpose was to see whether there were any grounds for challenging the three-year cap on his claim.  The officer responded on 13 May 2008 as follows:
“Upon reviewing the specific aspects of your case I was in agreement with yourself that the department had failed effectively to publicise the fact that the allocated trade sector percentage for the Flat-rate Scheme can differ to [sic] the general trade classification assigned during the initial registration process.
As in your case the failure to effectively publicise the fact that the flat rate percentage allocated is not governed by the general trade classification could reasonably lead to the assumption that entry onto the Flat-rate Scheme would not be of financial benefit if your understanding all be it incorrect was that the two classifications had to be more or less identical.
Please note the error is one of general omission and I make no criticism of any individual officer.”
26.	The Appellant then challenged the 1 April 2005 start date, arguing first, that the start date should be dated back to, at the latest 1 July 2004, and secondly that the three-year cap should not apply at all, since it was unreasonable to apply the cap in circumstances where the Commissioners had failed to inform taxpayers of the correct operation of the Flat-rate Scheme with respect to trade classifications and business categories.
27.	On 27 June 2008 the Commissioners wrote to the Appellant to explain that the 1 April 2005 retrospective entry date had been determined as it was the date which was approximately three years prior to the date on which the Appeals and Reconsiderations unit had agreed to allow the Appellant a retrospective entry date into the Flat-rate Scheme.  The letter continued in these terms:
“However the crux of the matter is the three year capping issue as you are aware any reclaim that you intend to make would be subject to a three year restriction.
The three years takes effect from the date that you quantify the amount due to yourself, therefore I would recommend that you submit quantifying information as soon as possible.”
28.	On 28 July 2008, after the Appellant had indicated his intention to appeal against the Commissioners’ decision, the Commissioners wrote to the Appellant to send him an application for him to appeal to the tribunal.  In that letter the Commissioners stated: “As discussed prior to making your request for a tribunal hearing you must make a voluntary disclosure for the amount you calculate is due to yourself.”  There is then set out the relevant parts of the legislation relating to the three-year cap and the date by reference to which the three years runs.
29.	On 15 August 2008 the Appellant wrote to the Commissioners at their Voluntary Disclosures office setting out the history of the matter and enclosing calculations of the VAT overpaid for the quarterly accounting periods 06/02 to 06/07 (that is, overpaid on the basis that the Appellant was entitled to be in the Flat-rate Scheme since its introduction in April 2002).
30.	There was further correspondence between the Commissioners and the Appellant and on 23 September 2008 the Commissioners wrote to the Appellant advising him that since the letter quantifying the claim for overpaid VAT was received in August 2008, and since such claim was subject to the three year capping rules, the claim would be allowed for the quarters 09/05 to 06/07 only, allowing the Appellant a repayment of £8,716.00.  That amount was subsequently paid to the Appellant.
31.	The Appellant appeals against that decision.  The original repayment claim for the period 06/02 to 06/07 totalled £17,112.79 so that, with certain minor adjustments made by the Commissioners, the amount of the Appellant’s claim which has been refused is £8,403.60.
32.	On 10 October 2008 the Appellant appealed to the tribunal against the decision of the Commissioners.  The grounds of appeal were that the three year cap should not be applied as there was a “secret policy” of which the Appellant could not be aware, namely that the “Any other activity not listed elsewhere” business category for the purposes of the Flat-rate Scheme applied where the taxpayer’s VAT registration trade classification did not accord with a specific business category.  The Appellant also claimed that if capping should apply, then the three years should run back from the date of his initial enquiry (November 2007) and not from the date he submitted his claim (August 2008).
33.	On 15 December 2008 the Appellant revised his grounds of appeal, stating them over five pages, with additional grounds that the capping provisions did not, in their terms, apply as the Commissioners had sought to apply them, and that Community law should be applied to set aside capping in order to give effect to the principle of effectiveness, the Appellant having been denied his Community law rights to participate in the Flat-rate Scheme as he was excluded from the operation of the Scheme by the failure of the Commissioners to make it clear to taxpayers that the residual business category applied to persons such as the Appellant.  The Appellant sought compound interest on the amount due to him.
The relevant legislative provisions
34.	The provisions relating to claims made by a taxpayer for repayment of overpaid VAT, and the time limits within which such claims must be made, are found in section 80 VATA 1994, which is headed “Credit for, or repayment of, overstated or overpaid VAT”.  The provisions relevant to this appeal are as follows:
(1)	Where a person – 
(a)	has accounted to the Commissioners for VAT for a prescribed accounting period (whenever ended), and
(b)	in doing so, has brought into account as output tax an amount that was not output tax due,
the Commissioners shall be liable to credit the person with that amount.

(1A)	Where the Commissioners – 
(a)	have assessed a person to VAT for a prescribed accounting period (whenever ended), and
(b)	in doing so, have brought into account as output tax an amount that was not output tax due,
they shall be liable to credit the person with that amount.

(1B)	Where a person has for a prescribed accounting period (whenever ended) paid to the Commissioners an amount by way of VAT that was not VAT due to them, otherwise than as a result of – 
(a)	an amount that was not output tax due being brought into account as output tax, or
(b)	an amount of input tax allowable under section 26 not being brought into account,
the Commissioners shall be liable to repay to that person the amount so paid.

(2)	The Commissioners shall only be liable to credit or repay an amount under this section on a claim being made for the purpose….

(4)	The Commissioners shall not be liable on a claim under this section - 
(a)	to credit an amount to a person under subsection (1) or (1A) above, or
(b)	to repay an amount to a person under subsection (1B) above,
if the claim is made more than 3 years after the relevant date.

(4ZA)	The relevant date is – 
(a)	in the case of a claim by virtue of subsection (1) above, the end of the prescribed accounting period mentioned in that subsection, unless paragraph (b) below applies;
(b)	in the case of a claim by virtue of subsection (1) above in respect of an erroneous voluntary disclosure, the end of the prescribed accounting period in which the disclosure was made;
(c)	in the case of a claim by virtue of subsection (1A) above in respect of an assessment issued on the basis of an erroneous voluntary disclosure, the end of the prescribed accounting period in which the disclosure was made;
(d)	in the case of a claim by virtue of subsection (1A) above in any other case, the end of the prescribed accounting period in which the assessment was made;
(e)	in the case of a claim by virtue of subsection (1B) above, the date on which the payment was made….

(6)	A claim under this section shall be made in such form and manner and shall be supported by such documentary evidence as the Commissioners prescribe by regulations; and regulations under this subsection may make different provision for different cases.

(7)	Except as provided in this section, the Commissioners shall not be liable to credit or repay any amount accounted for or paid to them by way of VAT that was not VAT due to them.

35.	The regulations specifying the form and manner in which a taxpayer must make a claim for repayment of overpaid VAT under section 80 VATA 1994 are found in regulation 37 of the Value Added Tax Regulations 1995, which provide as follows:
Any claim made under section 80 of the Act shall be made in writing to the Commissioners and shall, by reference to such documentary evidence as is in the possession of the claimant, state the amount of the claim and the method by which that amount was calculated.
36.	The broad scheme of the legislation, therefore, is that a claim for repayment of VAT that has been overpaid in any VAT accounting period must be made within three years of the end of the accounting period in which the VAT has been overpaid.  A claim for repayment is not made unless and until it is made in writing to the Commissioners, stating the amount claimed and the calculation of that amount.
The Appellant’s submissions
37.	The Appellant argued his case in person, demonstrating a very extensive knowledge of VAT law and Community law in the area of dispute.  He submitted to the tribunal a detailed, thorough and helpful skeleton argument setting out his submissions, and at the hearing presented his case clearly and comprehensively.  He explained that he had spent many hours researching into the matter and in preparing his case, and that was evident to us from the case he presented.
38.	The Appellant accepted that the issue for the tribunal is whether the three year capping rules apply to his claim for a VAT repayment dating back to at least April 2005, and, he would argue, to April 2002; and if those rules do apply, when is the date when the three year limit applies.  He accepted that if the tribunal decides that the three year capping rules apply, that disposes of the matter; but that if the tribunal decides that those rules do not apply, there is then a separate matter to be determined with the Commissioners, namely, when, at law, he is to be treated as having entered the Flat-rate Scheme, whether on 1 April 2005 (which the Commissioners appear to have accepted) or on an earlier date: and if on 1 April 2005, whether that is a reasonable decision on the part of the Commissioners.
39.	The Appellant argued that he was aware of the Flat-rate Scheme since its inception, but considered that his trade classification for VAT registration purposes (which he had regularly explained to the Commissioners over the years was not an accurate description of his business activities) would result in his being placed in the Scheme business category “Computer and IT consultancy” which (because of the relatively high appropriate percentage applied to that business category) would have resulted in his paying more, rather than less, VAT if he had joined the Scheme.  As a result he did not apply to join the scheme until a colleague in a similar line of business explained that he was in the Scheme on a different (and lower) appropriate percentage.
40.	The Appellant’s view that he would, as a consequence of his VAT registration trade classification, be placed in the “Computer and IT Consultancy” business category was the logical conclusion of anyone reading the Commissioners’ publications on the Flat-rate Scheme (the Appellant referred to parts of the consultation document prior to the introduction of the Scheme, and to extracts from the Commissioners’ Internal Manual dealing with the Scheme, as showing that the normal procedure is to correlate the business scheme to the trade classification when a person applies to enter the scheme).  By the Commissioners’ own admission (in their letter of 13 May 2008) they had failed effectively to publicise the fact that a taxpayer may enter the Flat-rate Scheme on the basis of a different business category from the trade classification in which he is registered for VAT, and they recognised that such failure could be detrimental to a taxpayer.
41.	Since a taxpayer such as the Appellant could therefore not be aware that he could be placed in a different business category, this amounted to a policy of the Commissioners that you cannot know about unless you ask about it – a policy which is hidden from the taxpayer’s view.  Only later was the Appellant able to discover this policy and only then could he apply to join the Flat-rate Scheme on the terms properly applicable to him.  At that point the Commissioners invoked the three-year capping provisions.  But, by reason of the “unknowable” policy, the Appellant had been prevented from making his claim until a time when the capping provisions applied to his claim, which was prejudicial and unfair to the Appellant.  Therefore the capping provisions should be set aside since they “render virtually impossible or excessively difficult the exercise of rights conferred by Community law”, those rights being the entitlement to be repaid overpaid VAT.  The capping provisions breach the Community law principle of effectiveness and therefore cannot apply.  In support of this the Appellant referred to the European Court of Justice case of Santex SpA v Unita Socio Sanitaria Locale n.42 di Pavia, and Sca Mölnlycke Spa, Artsana Spa and Fater Spa [2003] C-327/00, which relates to a notice of invitation to tender, where the tenderer was deprived of his Community rights by a limitation period imposed by national law, and where the court held that the limitation period must be disapplied if that is necessary to protect Community law rights.
42.	Alternatively, the Appellant argued that the capping provisions do not apply as the Commissioners contend.  The language of section 80 VATA 1994, with its reference to overpaid VAT, predates the Flat-rate Scheme and does not sit easily with what happens under the Scheme.  In particular, section 80(1)(b) VATA 1994 refers to a taxpayer who “has brought into account as output tax an amount that was not output tax due”: there is no overpayment of output tax by reason of a taxpayer coming within the Scheme – the amount of output tax he accounts for is the same, whether within or outside the Scheme.  The language of section 80(1B) VATA 1994 is more apposite, speaking, as it does, of a person who has “paid to the Commissioners an amount by way of VAT that was not VAT due to them, otherwise than as result (a) an amount that was not output tax due being brought into account as output tax, or (b) and amount of input tax allowable under section 26 not being brought into account”.  
43.	If section 80(1B) VATA 1994 is the relevant provision, then section 80 (4ZA) (e) VATA 1994 applies, so that the date from which the three-year cap runs is the date on which the overpayment was made, and since no overpayment was made until the Appellant entered the Flat-rate Scheme in April 2008, a claim made within the following three years is valid, even if it relates to VAT accounting periods prior to that date.  The Appellant’s case could be distinguished from that of the taxpayer in Bissell Homecare (Overseas) Inc v The Commissioners of Customs and Excise VAT Decision No 18217, since in the Appellant’s case the amount of tax overpaid could not be known until the Appellant entered the Flat-rate Scheme (or at least until it knew the correct basis on which it could enter the Scheme).  Similarly it could be distinguished from that of the taxpayer in Malcolm Hutchinson t/a Clifton Nurseries v HMRC First-tier Tribunal (Tax) decision TC00200 where the taxpayer had failed to notice that the Flat-rate Scheme appropriate percentage for his business category had changed, but capping applied to his claim for overpayment in circumstances where the taxpayer could have ascertained the amount overpaid.  The case of LAMIT v The Commissioners of Customs & Excise [2003] EWHC 2766 (Ch), on which the Commissioners rely, can be distinguished for similar reasons.
44.	Finally, the Appellant pointed out that he had been prejudiced because the various officers of the Commissioners dealing with his case had not made it clear, even when capping was an issue under discussion, that he needed to make a specific claim with a calculation of the overpayment in order to stop the capping clock running.  Had that been pointed out to him he would of course have taken that action before August 2008 (he had made the calculation back in October 2007 before raising the whole issue).  However, the Appellant understood that such failure on the part of the Commissioners was a matter of administrative failure, for which the tribunal could offer no remedy.  (Since the hearing of this case the judgment has been issued in the case of Oxfam v HMRC [2009] EWHC 3078 (Ch), which indicates that the tribunal may, in certain circumstances and where the matter is related to an appeal within its statutory jurisdiction, judicially review an administrative action prejudicial to the expectations of a taxpayer.  In the present case our decision against the Appellant on the principal issue has the result that we need not consider that matter.)
The Commissioners’ submissions
45.	Mr Singh, appearing for the Commissioners, argued first that there had been no breach of the principle of effectiveness whereby the Appellant was denied his right to recover overpaid tax for the simple reason that the Appellant had not overpaid any tax.  The Commissioners had proceeded on the basis that the start date for the Appellant entering the Flat-rate Scheme should be April 2005 (that itself was contrary to their policy on retrospective start dates), but unless the Appellant agreed that to be the case it could not be the start date since the relevant regulations relating to the Scheme specified that a retrospective start date takes effect only when both taxpayer and Commissioners agree to that date.  It was not established that the Appellant had agreed to that date.  Nor was there agreement as to the earlier date of April 2002.  If there was no such agreement, nothing had been overpaid by the Appellant, and he had no right to recover anything.  It was true that the Commissioners had repaid a sum to him, relating back to July 2005, but that was paid under a mistake as to the facts and law, and not pursuant to an obligation of law to the Appellant.  The repayment the Appellant had received was, in effect, a windfall for him. 
46.	Secondly, Mr Singh argued that, even if the Appellant had a right to recover tax which it was established had been overpaid, the exercise of that right had not been made virtually impossible or exceedingly difficult by reason of the Commissioners applying the statutory cap, and thus there had been no breach of the principle of effectiveness.
47.	A claim under section 80 VATA 1994 for repayment of overpaid VAT is subject to strict requirements as to its form and manner, by reason of regulation 37 of the Value Added Tax Regulations.  The Appellant did not make a claim for repayment in accordance with those requirements until 15 August 2008, and the limitation period was the three years ending on that date.  That was what the law provided, and the Commissioners had duly applied that law.  The relevant case law is clear that the application of a three-year limitation period does not breach the principle of effectiveness.
48.	Although the Commissioners have a discretion which enables them to waive the effect of the three-year limitation, they cannot be compelled to exercise that discretion, and if they seek to rely on it that cannot be challenged, at least outside the scope of any published concession: R (on the application of British Telecommunications plc) v Revenue and Customs Commissioners [2005] EWHC 1043 (Admin).  This is so because such a limitation is imposed to ensure legal and fiscal certainty for both taxpayer and the Commissioners.  It is imposed against a taxpayer only where the taxpayer (who is himself responsible for calculating the VAT he owes) has made a mistake in overpaying tax.
49.	In the cases dealing with the requirement to introduce a transitional period when reducing the cap from six to three years, the courts have emphasised that the existence of a limitation period does not itself render impossible the exercise of a right under Community law (such as the right to be repaid overpaid tax), although the absence of a transitional period when introducing such a limitation (or curtailing the limitation) does so in the case of accrued claims which are prejudiced by the change in law and to that extent breaches the principle of effectiveness: see Marks & Spencer plc v Customs and Excise Commissioners (Case C-62/00) at para [35]; also Fleming (t/a Bodycraft) v Revenue and Customs Commissioners [2008] UKHL 2.  A capping period of three years has expressly been held to be compatible with the principle of effectiveness: Grundig Italiana SpA v Ministero delle Finanze (Case C-255.00); LAMIT v Customs And Excise Commissioners [2003] EWHC 2766 (Ch).
50.	The Santex case relied on by the Appellant concerns a case where there was a breach of the principle of effectiveness, and the question was how the national court should treat such a case.  Since Section 80 VATA 1994 capping does not breach the principle of effectiveness there is no question of the proper response of the national court.
51.	The Appellant’s case, when analysed, is not that the application of the capping provisions prevents him from recovering overpaid VAT, but that what he alleges is the “secret” or “unknowable” policy of the Commissioners (that the business category of a trader for the purposes of the Flat-rate Scheme can differ from the trade classification assigned to him on registration) has prevented him from exercising his Community law right to recover overpaid tax.  In such a situation, he argues, the Commissioners should exercise a discretion to waive the application of the cap.  The exercise of such a discretion is not, however, a matter on which an appeal can be made to the tribunal.
52.	Further, the Commissioners deny that the categorisation of business for the Flat-rate Scheme is applied on the basis of a policy which is “secret” or “unknowable”.  As soon as the Appellant approached the Commissioners to apply for entry into the Flat-rate Scheme (October 2007), the question was discussed and guidance was given to the Appellant that his circumstances might be such that he should be in the “Any other activity not listed elsewhere” business category, which was guidance publicly available on the Commissioners’ website and in the relevant VAT Notice.
53.	As to the Appellant’s argument that section 80(1B) VATA 1994 applies to his circumstances rather than section 80(1) VATA 1994, that is incorrect.  The Appellant’s case is that an amount that was not output tax due was brought into account as output tax, which is expressly the circumstance which section 80(1B) VATA 1994 does not deal with.  Section 80(1) VATA 1994 is the applicable provision, and accordingly a claim for recovery of overpaid tax is time-expired if it is made more than three years after the end of the accounting period in which the tax in question is brought into account.  Accordingly, the Commissioners have correctly applied to the Appellant’s circumstances the capping provisions.
54.	Mr Singh agreed with the Appellant that any question as to the conduct of the Commissioners with regard to any failure on their part to encourage the Appellant to make his claim was not a matter for the tribunal.  However, since the matter had been raised by the Appellant the Commissioners wished to make it clear that, as the correspondence demonstrated, their conduct could not be criticised: they had advised the Appellant of his ability to make a claim for overpaid VAT, and it was then a matter for the Appellant to decided whether to make such a claim and when and how to make submit it.  The Commissioners had no obligation of any kind to encourage him to make such a claim.
Decision
55.	The Appellant in this case seeks to have the statutory three-year “capping” rules set aside in his particular circumstances.  The Commissioners argue that those rules are absolute and that there is no principle of law which, in the Appellant’s circumstances, operates so as to permit or require the tribunal to reach a decision which disregards the effect of the “capping” rules.
56.	At the risk of repeating the point, it is assumed for the purposes of the case that the Appellant is entitled to join the Flat-rate Scheme on or before April 2005 (or that a reasonable exercise by the Commissioners of their discretion as to whether to permit a retrospective start date for the Appellant would result in such an outcome).  That is not the issue in dispute for present purposes.
57.	Before considering whether the “capping” rules can or should be set aside it is helpful to decide how they apply in the Appellant’s case, since that is a matter of dispute between the parties.
58.	The Commissioners argue that the Appellant’s circumstances come within the terms of section 80(1) VATA 1994, since he has “accounted to the Commissioners for VAT for a prescribed accounting period…and in doing so, has brought into account as output tax an amount that was not output tax due”.  In consequence, section 80(4) and (4ZA)(a) VATA 1994 applies so that a claim for repayment of tax must be made within three years after the end of the VAT quarterly accounting period in which the Appellant accounted to the Commissioners for the VAT which was not output tax due.
59.	The Appellant argues that the VAT he overpaid by reason of not applying the Flat-rate Scheme was not output tax due, so that his circumstances fall within section 80(1B) VATA 1994.  That being so, it is section 80(4ZA)(e) VATA 1994 which applies, so that the claim for repayment of tax must be made within three years after the date on which the overpayment was made, which the Appellant argues was in April 2008, when he knew he had joined the Flat-rate Scheme with retrospective effect.
60.	The assumption is that the Appellant accounted for VAT in the normal invoice-based way when he should have accounted for a lesser amount of VAT by the operation of the Flat-rate Scheme.  The Flat-rate Scheme provides that the amount of VAT for which the taxpayer has to account in any quarterly VAT period is based entirely on a percentage of what is referred to as his “relevant turnover” for that period.  Where the only supplies a taxpayer makes are standard-rated supplies, his “relevant turnover” is the value of those supplies plus the VAT chargeable on them.  Thus the taxpayer does not have to keep account of his input tax – it plays no part in calculating the amount of VAT for which he must account (subject to certain exceptions for acquisitions of capital goods).  It is this accounting simplification feature which renders the Flat-rate Scheme a benefit to small businesses.
61.	The Appellant’s argument is that section 26B VATA 1994, which introduces the Flat-rate Scheme, is not concerned with output tax – it speaks only of “the amount of [a taxable person’s] liability to VAT in respect of his relevant supplies in any prescribed period” being “the appropriate percentage of his relevant turnover for that period”.  That being so, section 80(1) VATA 1994, with its emphasis on output tax overpaid, is not in point, but section 80(1B) VATA 1994, which is not so constrained, is.  He argues that the amount of output tax a taxpayer within the Flat-rate Scheme charges is unaffected by being within the Scheme.
62.	This seems to us to be based on a misunderstanding of the way the scheme of the VAT legislation works.  Output tax is defined in section 24 VATA 1994 to mean, in relation to a taxable person, “VAT on supplies which he makes” (or on a self-supply acquisition).  Each quarter he must account for and pay VAT to the Commissioners on the supplies he makes subject to a credit for input tax, as provided in section 25 VATA 1994.  A taxable person within the Flat-rate Scheme continues to account for and pay VAT on the supplies he makes, but the extent to which he so accounts for and pays VAT is adjusted: instead of being reduced by credit for any input tax, it is arithmetically reduced by applying the specified percentage to the aggregate of the value of supplies plus the VAT chargeable on those supplies.  It remains the case that, within the Flat-rate Scheme, the taxable person accounts for VAT which is output tax.  
63.	If, therefore, a person accounts for and pays more VAT because he was outside the Flat-rate Scheme when he should have accounted for and paid VAT as provided by the Scheme, he does so because he has brought into account as output tax an amount that he would not have accounted for as output tax had he applied the terms of the Scheme.  This is a situation which accords with the language of section 80(1) VATA 1994, which should not be regarded as limited in its application to the circumstances where a taxable person has mistakenly treated a supply as a taxable supply when in fact it is not.  A situation which is within section 80(1) VATA 1994 is excluded from being within section 80(1B) VATA 1994.
64.	Therefore, applying section 80(4ZA)(a) VATA 1994 (which applies in the case of a taxpayer’s claim by virtue of section 80(1) VATA 1994), the “relevant date” within three years from which the claim must be made is the end of the accounting in which the overpaid output tax was accounted for.  The Appellant made his valid claim for repayment on 15 August 2008, so that the limitation period prevents him from claiming for any overpayment in his quarterly accounting periods prior to the 09/05 period.  The Commissioners have therefore correctly applied the “capping” provisions to the Appellant’s circumstances.
65.	On the question of the proper application of section 80 VATA 1994 we would add this: even if the Appellant were correct that his overpayment fell within section 80(1B) VATA 1994 (and not section 80(1)), that does not assist him.  Section 80(4ZA)(e) VATA 1994 then applies, so that the relevant date within three years from which the claim must be made is the date on which the overpayment is made.  In the circumstances of the Appellant, any overpayment is made when, following the end of a quarterly accounting period, a return is made and the tax paid.  Counting three years back from 15 August 2008, no payment made before 15 August 2005 can validly be claimed, meaning, in effect, that the overpayment made for the quarter ended September 2005 is the first overpayment for which a claim is not precluded by the “capping” provisions.  The Appellant argued that, since he did not know he was eligible to join the Flat-rate Scheme with retrospective effect until April 2008, he could not have known he had overpaid until that date, so that the three years should run from that date.  That view is simply wrong: for section 80 VATA 1994 purposes the “relevant date” is determined, in all the different circumstances of overpayment to which it applies, by reference to when an overpayment is made, not when it is discovered that there has been an overpayment.
66.	Since we conclude that, assuming the “capping” provisions are to be applied at all, the Commissioners correctly applied them to the circumstances of the Appellant, we come to the Appellant’s case that they should, in his particular situation, be set aside on the grounds that he has been effectively prevented from exercising his Community law rights to recover overpaid VAT.
67.	It is clear from the case law that although the three-year “capping” provisions which apply in the United Kingdom in the case of overpayments of VAT by a taxpayer will prevent a taxpayer making a claim outside the three year limitation period, he is not thereby to be regarded as prevented from exercising his Community law rights.  This is because such rights are subservient to the need for legal and fiscal certainty in such cases.  The point was made in this way by the European Court of Justice in the Marks & Spencer plc case, at [35] of the court’s judgment:
“As regards the latter principle, the court has held that in the interests of legal certainty, which protects both the taxpayer and the administration, it is compatible with Community law to lay down reasonable time limits for bringing proceedings (see Aprile Srl (in liquidation) v Amministrazione delle Finanze dello Stato (No 2) [2000] 1 WLR 126, para 19, and the case law cited therein).  Such time limits are not liable to render virtually impossible or excessively difficult the exercise of the rights conferred by Community law.  In that context, a national limitation period of three years which runs from the date of the contested payment appears to be reasonable (see, in particular, Aprile, para 19, and Dilexport Srl v Amministrazione delle Finanze dello Stato [1999] ECR I-579, para 26).”
The UK courts have applied this reasoning: see in particular Local Authorities Mutual Investment Trust v Customs and Excise Commissioners  [2003] EWHC 2766 (Ch).
68.	The Marks & Spencer plc case went on to hold that the introduction of such a limitation period with retrospective effect but without an adequate transitional period to safeguard a taxpayer’s accrued claims was, however, a breach of the principle of effectiveness, since the absence of the transitional period (not the limitation period itself) rendered it impossible for the taxpayer to exercise those accrued rights.  This reasoning was followed in the House of Lords decision in Fleming (trading as Bodycraft) v HMRC; Condé Nast Publications Ltd v HMRC [2008] UKHL 2, where again the principle of effectiveness was breached by an inadequate transitional provision, not the imposition of a three-year limitation period.
69.	The Appellant has no basis for arguing that he has accrued rights which have been thwarted by an inadequate transitional period.  He has to construct a more elaborate argument, namely that, because of the failings of the Commissioners, he could not have known of his right to join the Flat-rate Scheme on the basis applicable to him (and hence could not have known of his right to claim a repayment if he joined the Scheme with retrospective effect) until a time when his rights were curtailed by reason of the limitation period.  For that reason there has been a breach of the principle of effectiveness.
70.	This argument does not succeed in our judgment.
71.	First, there is no authority which supports an argument on these lines – that in itself is not fatal to the Appellant’s case, but it raises a high bar for him to cross.  The Appellant did refer us to the case of Santex SpA v Unita Socio Sanitaria Locale n.42 di Pavia, and Sca Mölnlycke Spa, Artsana Spa and Fater Spa [2003] C-327/00, a decision of the European Court of Justice.  This is not a case dealing with taxation, but concerns Community law relating to the award of public supply contracts.  The appellant in the case was precluded from tendering for such a contract by reason of a provision in the notice of invitation to tender that only contractors who over the three years prior to the tender process could demonstrate a specified minimum turnover in supplying services of the relevant kind could tender for the contract.  The appellant was of the view that, had it not been precluded from tendering by this provision, it would have been awarded the contract.  The appellant applied for the tender process to be annulled on various grounds, including the ground that the tender process as conducted by the contracting authority prevented the appellant from exercising Community law rights.  The appellant’s application to the relevant national court for annulment of the process was made outside a time limit of 60 days imposed by national law in the case of such applications (the 60 days running from the date the invitation to tender was published).  Its application was made outside the 60 day period because of prevarication on the part of the tendering authority, not as a result of the appellant’s delay.  The national court, in referring the matter to the European Court, took the view that the tendering process as applied by the contracting authority had rendered impossible or excessively difficult the exercise of Community law rights by the appellant tenderer.  The European Court held that in such a case, where there had been a breach of the principle of effectiveness, the national court should not then enforce a limitation period which otherwise denied the injured party the ability to claim such breach.
72.	In the Santex case it is not the application of the limitation period which breaches the principle of effectiveness, but, as the national court had found, the action of the contracting authority in its conduct of the tender process which prevented the appellant in the case from participating in the tender process.  The position was compounded by the action of the contracting authority preventing the appellant from making his appeal against the illegality of the tendering process until the limitation period had expired.  The European Court was then, in that particular situation, asked to pronounce on whether there should be suspension of a limitation period.
73.	In the present case, the Appellant does not begin to be within the purview of the Santex case unless he can show that a national court – presumably this tribunal – finds that, disregarding the effect of the three-year “capping” limitation, the Appellant has been put in a position where it is virtually impossible for him to exercise his Community law rights.  But in the Appellant’s case there is nothing which one might call an antecedent breach of the principle of effectiveness: there is nothing – such as the absence of a reasonable transitional period or an unlawful tender process – which prevents the Appellant from reclaiming overpaid tax except the statutory limitation itself, and that, as is clear from the case law, is not to be regarded as rendering as impossible the exercise of Community law rights.
74.	Furthermore, we do not consider that the Appellant can fairly be regarded as a casualty of a “secret” or “unknowable” policy of the Commissioners such that he was effectively prevented from joining the Flat-rate Scheme:  that is the heart of the Appellant’s case, that the policy that if your business did not fit into a particular business category for the Scheme’s purposes then you were entitled to use the “Any other activity not listed elsewhere” category was, in his words, “a policy you have to know in order to be able to ask about it”.
75.	The starting point is that VAT is a self-assessment tax, so that the burden is upon the taxpayer to discover how he must apply the tax to his circumstances and business.  It follows that where a form of relief is available to a taxpayer (and the Flat-rate Scheme may be regarded as such in that it eases the burden of record-keeping and permits an eligible trader to reduce the amount of tax he must account for) it is for the taxpayer to determine whether and how that relief is applicable to his situation.  The Commissioners will facilitate this by publicity and explanation, but the responsibility is upon the taxpayer.  The responsibility upon the Commissioners is not to deny the relief if the taxpayer is eligible, and, in its explanation of the relief, not to mislead the taxpayer into concluding that the relief is not available to him.  We should add that the question of whether the Commissioners have denied relief is likely to be a question of law within the tribunal’s competence, but the question of whether a taxpayer has been misled is likely to be a question of public law for review by the High Court (or, possibly, the tribunal, having regard to the Oxfam case).
76.	In the present case the Appellant has known from the outset of trading that his business is specialised and unusual.  In particular, he has known that it does not sit comfortably within any of the very wide range of trade classifications used by the Commissioners for registration purposes.  It is a matter that has exercised the Appellant’s mind from time to time, and in 1997 he specifically raised it with his VAT officer, and some reclassification adjustment was made, but even then it was acknowledged by both sides that the revised trade classification (“72200 – software consultancy and supply”) did not accurately describe the Appellant’s business.  In this context it is reasonable to expect the Appellant to bring an enquiring mind to the issue of the business category which is likely to be applicable to him when considering whether or not to join the Flat-rate Scheme.
77.	We were taken through the publications issued by the Commissioners to taxpayers on the question of applicable business categories.  Notice 733 “Flat rate scheme for small businesses” was first published in 2002 on the introduction of the Scheme.  Paragraph 5.1 is headed “How do I decide which flat rate applies to my business?”, and reads:
“To determine the flat rate for your business, look at the table below and decide which of the sectors most accurately reflects your business.  You then apply the appropriate flat rate percentage to the turnover determined in accordance with Section 6 to arrive at the VAT due to us under the flat rate scheme.”
There follows a table with a list of business categories (referred to as “trade sectors”), with a flat rate percentage specified against each business category.  The list is in ascending percentages.  It includes, against 11.0%, “All other activity not elsewhere specified”; and, against 14.5%, “Computer and IT consultancy or data processing”.  There is no reference at all to registration trade classifications.
78.	Notice 733 was re-issued in January 2003, but, at least in relation to choosing the relevant business category, was in identical form to the original Notice.
79.	There was a further re-issue of Notice 733 in February 2004 which had a slightly different formulation.  Paragraph 6.1 is headed “Which flat rate applies to my business?”, and reads:
“To work out the flat rate for your business, look at the table in paragraph 6.3 and decide which of the sectors most closely describes what your business will be doing in the coming year.  Just give the words their ordinary meanings.  If you have difficulty deciding on a sector, go to the flat rate scheme ready reckoner at [website address].  The number allocated to your trade sector is your flat rate percentage.”
Again, there follows a table of business categories and respective percentages, listed in ascending order of percentage, and including “Any other activity not listed elsewhere” against 10.0% and “Computer and IT consultancy or data processing” against 13.0%.  There is no reference to registration trade classifications.
80.	In March 2007 there was a further re-issue of Notice 733, and on this occasion there was a more radical revision of the section dealing with choosing the applicable business category.  Paragraph 4.1 is headed “Which flat rate applies to my business?”, and reads:
“The flat rate you use depends on the business sector that you belong in.  All the sectors are in the table in paragraph 4.3.  The correct sector is the one that most closely describes what your business will be doing in the coming year.  The easiest way to identify your sector is by using the online ready reckoner.  This also shows you which businesses we think belong in each sector.  If you cannot go online, then go through the following steps.
1	See if your business is mentioned in the table in paragraph 4.3
2	Check the table again to make sure your business is not mentioned in a composite sector
3	If there is no sector that mentions your business, look at the sectors for ‘Businesses not mentioned elsewhere’
4	If you still haven’t found a sector your can use ‘Any other activity not listed elsewhere’.  However, if you are still unsure, or unhappy with your choice, you can phone our National Advice Service”
This is followed by the table of business categories and respective percentages, now organised by business category in alphabetical order, and listing “Any other activity not listed elsewhere”, with a percentage of 10, and “Computer and IT consultancy or data processing”, with a percentage of 13.  There is an additional list which “gives the trade sector for particular business activities which have been the subject of common enquiries to our National Advice Service”.  Again, there is no reference to registration trade classifications.
81.	What is clear from Notice 733 is that the business categories (of which there are in the order of fifty in the lists appearing in the different versions of the Notice) must be viewed and chosen by reference to the business which the taxpayer is carrying on, and not by reference to the trade classification (of which there are many more) under which he has been registered for VAT.  Of course, in many – perhaps most – cases a trade classification will be identical to a Flat-rate Scheme business category, or so close as to make it obvious which business category is the correct one for the taxpayer concerned.  But it has been apparent from the inception of the Scheme that, first, the starting point in choosing a business category is the actual business, and, secondly, that there is a residual category for those cases where no specific business category matches, or is a close fit for, the taxpayer’s actual business.
82.	The Appellant did point out that in the relevant part of the internal guidance manual published by the Commissioners it specifies in the procedure for reviewing an application to join the Flat-rate Scheme that there should be a check that the chosen business category is consistent with the taxpayer’s trade classification as shown in his registration details.  That, it seems to us, is no more than a sensible standard administrative step by way of precaution or cross-check on the part of the Commissioners in a situation where it is the taxpayer who makes the choice of business category.  It is not evidence that taxpayers are led (or misled) by the Commissioners to regard trade classifications as a rigid and invariable method by which a taxpayer must choose the business category relevant to his activities.
83.	The taxpayer had a clear understanding of the nature of his business.  He knew that his business is specialised and unusual.  He also knew that his business is not properly described by the trade classification accorded to it.  In those circumstances, had he properly considered the matter he should have been put on enquiry that no specific business category in the Flat-rate Scheme described that business.  That might reasonably have led him to the conclusion that he should apply to join the Scheme under the business category “Any other activity not listed elsewhere” – at the very least it should have prompted him to raise the matter with the Commissioners.
84.	He was, of course, eventually prompted to do so for the first time in October 2007, whereupon he called the National Advice Service, with whom the matter was discussed.  Without any hesitation, at that initial point of contact with the Commissioners, the Appellant was directed to the “Any other activity not listed elsewhere” business category as the one likely to meet his situation.
85.	Whilst we take the view that the earlier versions of Notice 733 were not as explicit as the 2007 version in leading a taxpayer in the Appellant’s situation through the process to reach the “Any other activity not listed elsewhere” business category, those earlier versions do make it clear, first, that the actual business has to be aligned with a specific business category, and, secondly, that there is a residual category where no such alignment is possible.
86.	For these reasons we cannot accept that the Appellant was placed in a position, by virtue of any action or failure to act on the part of the Commissioners, whereby he could not have known of his right to join the Flat-rate Scheme within the business category in which he eventually joined the Scheme.  He was not put in a position where he could not recover overpaid tax (assuming the legitimacy of his retrospective entry into the Scheme) because the exercise of his rights had been rendered excessively difficult or impossible by the Commissioners hiding from him the means by which he could himself determine the business category appropriate for his business circumstances.
87.	The Appellant can point to the letter from the Commissioners of 13 May 2008 in which the officer then responsible for the case offered the view that there had been a failure to publicise the fact that trade classifications are not determinative of business categories for Flat-rate Scheme purposes, which might be a cause of confusion to taxpayers such as the Appellant.  In presenting their case the Commissioners did not accept that officer’s opinion.  In any event, the officer made that point by way of explanation of why he had agreed to allow the Appellant retrospective entry into the Scheme, a matter on which he had discretion (a discretion which he apparently exercised in a manner contrary to the Commissioners’ policy).  Although the officer went on to confuse the question of retrospective entry with the statutory “cap” on claiming a recovery of overpaid tax (a confusion which affected his colleagues), it is clear that the significance of the concession he makes relates only to the exercise of his discretion as to the date of joining the Scheme.  In any event, we, with the benefit of the arguments we heard and the evidence before us, have looked at the matter to an extent which we doubt the officer did, and we have reached a different conclusion.
88.	The Appellant therefore fails to make his case and we dismiss his appeal.
Appeal process
89.	The Appellant has a right to apply for permission to appeal against this decision pursuant to Rule 39 of The Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.   The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

EDWARD SADLER

TRIBUNAL JUDGE
RELEASE DATE: 16 February 2010

Authorities referred to in skeleton arguments and not referred to in the decision

Aprile Srl v Amministrazione delle Finanze dello Stato [1998] C-228/96
Terra Bauberdarf-andel Gmbh v Finanzamt Osterhold-Scharmbeck [2004] C-152/02
Calibre TAS Limited v HMRC [2007] VAT 20508
Anderson v HMRC [2007] VAT 20255
David Eric Burke v HMRC [2008] VAT 20881
Warren Bradley Estates v HMRC [2008] VAT 20672
Plazadome Limited v HMRC [2009] Tax Tribunal TC00179