[2010] UKFTT 307 (TC)

TC00594

Appeal number: TC/2010/11791

VAT – DATE OF REGISTRATION & INPUT TAX ON PRE-REGISTRATION SUPPLIES – Appellant requested back dating of  registration – HMRC’s refusal reasonable – no exceptional circumstances – repayment claim on supplies made six months before date of registration – supplies constituted single supplies of construction services – not entitled to claim VAT on such supplies  - Appeal dismissed 

FIRST-TIER TRIBUNAL

TAX 

	CRAZY FARM GOLF COURSE LIMITED	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

		TRIBUNAL: 	MICHAEL TILDESLEY OBE (TRIBUNAL JUDGE)	 
				CELINE CORRIGAN									
												
Sitting in public at Belfast on 24 June 2010

Appellant did not appear

Bernard Hayley advocate of the General Counsel and Solicitor’s office of HM Revenue & Customs, for HMRC

CORRECTED DECISION IN RESPECT OF SPELLING AND GRAMMATICAL ERRORS Regulation 37 Tribunal Procedure (First Tier Tribunal) (Tax Chamber) Rules 2009

© CROWN COPYRIGHT 2010

DECISION

The Appeal
1.	The Appellant was appealing against two HMRC decisions:
(1)	A refusal dated 12 June 2009 to backdate the Appellant’s effective date of registration from 1 December 2008 to 1 September 2008.
(2)	A refusal dated 25 May 2009 to give credit for VAT in the sum of ₤11,622 which was incurred on supplies made to the Appellant outside the period of six months before the effective date of registration on 1 December 2008.
The Hearing
2.	The Appellant did not attend the hearing. Mr Hayley advised the Tribunal that Stanley Woods & Co, the Appellant’s representative, had requested the Appeal to be heard in the Appellant’s absence. The Tribunal was satisfied that the Appellant had been duly notified of the hearing. The Tribunal decided that it was in the interests of justice to hear the Appeal in the Appellant’s absence in accordance with rule 33 of the Tribunal Rules 2009.
3.	Mrs S J Webster, the Officer who made the disputed decisions, gave evidence for HMRC. A bundle of documents which included the Appellant’s representations was received in evidence.
Reasons
Refusal to Backdate the Effective Date of Registration 
4.	On 20 August 2007 planning permission was granted to the Appellant to develop land as a crazy golf course. The Appellant engaged a contractor by the name of  Allscapes to construct the course which was completed in 2008.
5.	On 26 November 2008 the Appellant applied to register for VAT from 1 December 2008. The Appellant indicated on the application that it was making taxable supplies but at the moment its turnover was below the current registration threshold. After making further enquiries HMRC issued the Appellant with a VAT Registration Certificate on 20 March 2009. The Certificate had an effective date of registration of 1 December 2008.
6.	On 30 April 2009 the Appellant submitted a first period repayment return for the period 1 December 2008 to 31 March 2009 in the sum of ₤28,060.16. On 28 May 2009 Mrs Webster notified the Appellant of an amendment to its return in that the amount repayable would be reduced to ₤16,259.99. The reasons for the reduction were to take account of undeclared output tax of ₤312.31 and input tax incorrectly claimed on supplies of services which predated the effective date of registration of 1 December 2008 by six months.
7.	On 20 May 2009 the Appellant applied to change its effective date of registration to 1 September 2008 so that it could  recover the disallowed input tax. According to the Appellant, the application was submitted at the suggestion of Mrs Webster. 
8.	Mrs Webster confirmed that she had suggested to the Appellant that it could apply to amend the effective date of its registration but with no guarantee that it would be successful. On 12 June 2009 HMRC refused the Appellant’s application to change the date of registration.
9.	Under paragraph 9 of schedule 1 of the VAT Act 1994 HMRC is required to register for VAT a person who is not liable to be registered provided HMRC is satisfied that the person makes taxable supplies or is carrying on a business and intends to make such supplies in the course or furtherance of that business.  Paragraph 9 provides for  registration to take effect from the day on which the request is made or from such earlier date as may be agreed between the party and HMRC. In this case HMRC registered the Appellant from 1 December 2008 which was the date requested by the Appellant.
10.	There is no explicit power under schedule 1 of the VAT Act 1994 to change an effective date of registration previously agreed with the registered person. HMRC will, however, consider an amendment if information comes to light that the person should have been compulsorily registered from an earlier date or there are exceptional circumstances. HMRC interprets exceptional circumstances as an error on its part in respect of the registration process. 
11.	Under section 83(1)(a) of the 1994 Act an appeal shall lie to the  Tribunal with respect to a VAT registration of any person under the Act, which includes a dispute regarding the date of registration.
12.	The Tribunal in A Attwater, VAT Decision Number 15496, expressed the view that the date for registration, if other than the date of application, was essentially a matter for the discretion of HMRC. In those circumstances the Tribunal considered that its jurisdiction in respect of an Appeal against HMRC’s refusal to backdate the effective date of registration was limited to whether the refusal was reasonable. The test for reasonableness was whether HMRC acted in a way in which no reasonable panel of Commissioners for HMRC could have acted, namely HMRC took into account some irrelevant matter, or disregarded something to which weight should have been given, or erred in law. 
13.	 In this Appeal the Tribunal finds that
(1)	The Appellant requested that it be registered from 1 December 2008. It was open to the Appellant when it submitted its application for registration to apply for an earlier date but chose not to do so.
(2)	There was no legal liability to register the Appellant prior to 1 December 2008.
(3)	There was no error on the part of HMRC when it registered the Appellant with an effective date of registration of 1 December 2008.
(4)	The Appellant has not advanced any grounds which impugn HMRC’s refusal to amend the effective date of registration.
14.	In view of the above findings of fact the Tribunal is satisfied that HMRC’s refusal to change the effective date of registration was reasonable, and that the date should not be amended to 1 September 2008.
Refusal to Give Credit for VAT in the sum of ₤11,622
15.	The Appellant’s return for the period 1 December 2008 to 31 March 2009  submitted on 30 April 2009 included a claim for input tax in the sum of ₤11,622 which related to six invoices issued by Allscapes dated 4 March,  1 April, 10 April, 22 April, 24 April, and 28 May 2008. Each invoice recorded a net amount for payment for works plus a separate sum for the VAT incurred on the supplies.  HMRC formed the view that the details on the invoices indicated that the works related to supplies of construction services. In which case HMRC disallowed the repayment claims because the invoices fell outside the six month time limit applicable to claims relating to pre-registration supplies. 
16.	Following HMRC’s refusal of the claims, the Appellant resubmitted the invoices but this time the works showed separate values for materials and labour. The Appellant argued that the supplies by Allscapes constituted two distinct supplies, one of goods, and the other of services. The Appellant, therefore, contended that it was entitled to recover the VAT on the pre-registration supplies of goods which had the benefit of a three year time limit rather than the six month time limit for supplies of services.
17.	On 16 November 2009 HMRC requested the Appellant to provide copies of any contract or agreement with Allscapes so as to clarify the correct status of the supplies. The Appellant provided a copy of the tender document from Allscapes dated 4 March 2008 which broke down the supplies under five headings: Crazy Golf Course, Security Fencing Around Perimeters, Peripheral Landscaping, Lighting of Course and Reception Area. Under each heading Allscapes described the works as either construction or installation except Peripheral Landscaping where the activities were described as flagging, planting, kerbing, seating and gravel pathways. The tender document did not separate out the costs of materials from those for labour. Instead the document gave a price for each of the five headings plus a separate quotation for JCB hire.
18.	The disputed issue is whether the supplies of Allscapes constituted separate supplies of goods and services as contended by the Appellant or a single supply of construction services as asserted by HMRC.  
19.	The leading authority on single or multiple supplies is the decision of the European Court of Justice in Card Protection Plan (Case C-349/96) [1999] 2 A.C. 601).  The Court held that in deciding whether a transaction which comprises several elements is to be regarded as a single supply or as two or more distinct supplies to be assessed separately, regard must first be had to all the circumstances in which that transaction takes place, taking into account:
"29. . . . first, that it follows from article 2(1) of the Sixth Directive that every supply of a service must normally be regarded as distinct and independent and, secondly, that a supply which comprises a single service from an economic point of view should not be artificially split, so as not to distort the functioning of the VAT system, the essential features of the transaction must be ascertained in order to determine whether the taxable person is supplying the customer, being a typical consumer, with several distinct principal services or with a single service. 
30. There is a single supply in particular in cases where one or more elements are to be regarded as constituting the principal service, whilst one or more elements are to be regarded, by contrast, as ancillary services which share the tax treatment of the principal service. A service must be regarded as ancillary to a principal service if it does not constitute for customers an aim in itself, but a means of better enjoying the principal service supplied: Customs and Excise Commissioners v. Madgett and Baldwin (trading as Howden Court Hotel) (Joined Cases C-308/96 and 94/97) [1998] STC 1189, 1206, para 24." (p 627.) 

20.	 In this Appeal the Tribunal places weight on the tender document and the first set of invoices issued by Allscapes.  The documents made no mention of separate supplies of materials and labour. The documents demonstrated that the economic reality of the transaction was that Allscapes would construct a crazy golf course, and in so doing obtain the necessary materials to complete the task. The Tribunal finds that Allscapes made a single supply of construction services to the Appellant, and that the provision of materials was an integral and ancillary part of those services.  
21.	 Regulation 111of the Value Added Tax Regulations 1995 deals with exceptional claims for input tax. Regulation 111(2)(d) provides that no VAT may be treated as if it was input tax  in respect of services which have been supplied to the relevant person more than six months before the date with effect from which the taxable person was or was required to be registered.
22.	  The Tribunal finds that the Appellant was not entitled to claim the VAT on the invoices dated 4 March, 1 April, 10 April, 22 April, 24 April, and 28 May 2008 issued by Allscapes. The invoices concerned single supplies of construction services which were made more than six months before 1 December 2008, the Appellant’s effective date of registration.  
23.	  The Appellant’s representative in a letter dated 23 October 2009 suggested that the disallowance of input tax was an infringement of human rights. Further the Appellant’s business would be put in jeopardy by HMRC’s refusal of the repayment claim. The onus was upon the Appellant to substantiate a breach of the Human Rights Act, which it failed do. The Tribunal was unable to take into account the Appellant’s financial circumstances when determining the validity of a repayment claim.
Decision
24.	The Tribunal decides that
(1)	HMRC’s refusal to change the effective date of registration was reasonable, and that the date should not be amended to 1 September 2008.
(2)	The Appellant was not entitled to claim the VAT on the invoices dated 4 March, 1 April, 10 April, 22 April, 24 April, and 28 May 2008 issued by Allscapes. The invoices concerned single supplies of construction services which were made more than six months before 1 December 2008, the Appellant’s effective date of registration. 
25.	The Tribunal dismisses the Appeal. 
26.	This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.   The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  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.

                       

                                        MICHAEL TILDESLEY
TRIBUNAL JUDGE
RELEASE DATE: 6 July 2010