[2011] UKFTT 62 (TC)

TC00940

Appeal number:  LON/2009/0364

VAT – Flat rate scheme – Retrospective authorisation – Refusal to backdate to periods for which returns already made – held that refusal not unreasonable – VAT Regulations 1995, reg 55B(i) – VATA 1994, s.84(4ZA) – Appeal dismissed

FIRST-TIER TRIBUNAL
TAX CHAMBER

	 MURDOCH UK LTD	Appellant

	- and -

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

				TRIBUNAL: 	 JUDGE THEODORE WALLACE 
						 RICHARD THOMAS

Sitting in public in London on 15 December 2010

B Pusser, of B R Pusser & Co Ltd accountants, for the Appellant 

Jonathan Holl represented the Respondents

© CROWN COPYRIGHT 2010

DECISION

1.	This appeal concerned a refusal to backdate the Appellant’s authorisation to use the flat rate scheme for small businesses (“the Scheme”).

2.	The notice of appeal served on the Tribunal on 3 February 2009 identified the decision as contained in a letter dated 28 November 2008 and contended that the Appellant could have been on the Scheme from 1 February 2007 stating that by omission the Appellant had not been advised that he could be on the Scheme during an inspection in April 2007.

3.	The Appellant had been authorised to use the Scheme in a letter dated 14 September 2007 with effect from 1 June 2007.  This followed an application to join the Scheme dated 18 July 2007 which did not request retrospective authorisation.

4.	On 22 January 2008 Mr Pusser wrote that his client had not been aware that he could be on the Scheme and had not been advised by the VAT officer.

5.	The Complaints Team wrote on 3 March 2008 stating that the Scheme had been publicised in VAT Notes 1/2002 and 1/04 and that visiting officers had no responsibility to draw the attention of traders to the various accounting Schemes.  The letter continued that the Appellant could apply for retrospective application of the Scheme, referred to paragraph 5.5 of Notice 733 and said that if dissatisfied the Appellant could appeal to the Tribunal.

6.	Mr Pusser wrote on 16 May 2008 to apply that the Appellant should have been on the Scheme from 1 April 2005 and referred to financial hardship.

7.	On 23 June 2008 the National Registration Service at Grimsby wrote refusing to backdate authorisation to 1 April 2005.  That letter gave the following reasons:

“Section FRS 3300 of the FRS guidance states ‘The policy is to refuse retrospection where the business has already calculated its VAT liability for the period(s) using a different accounting method.  The reason for this is that FRS exists to simplify VAT accounting and record keeping for small businesses, so that they are able to spend less time on VAT’.

Section FRS 3300 of the guidance also states ‘In line with the rationale of the Scheme the fact that a business will pay, or would have paid, less tax, is not sufficient reason to authorise retrospective use of the FRS’.  

Where a trader has already calculated their VAT liability using normal accounting, retrospective use of the Flat Rate Scheme would be authorised only where justified by exceptional circumstances.
In your letter you stated ‘My Client had reclaimed VAT on what turned out to be bogus traders and the total liability was £2,652.42.’
The fact that your Client’s business would have paid less tax is not sufficient reason to authorise retrospective use of the FRS.”

The letter stated that the Appellant could appeal to the Tribunal.

8.	On 20 August 2008 the Appellant wrote to Customs appealing.  Customs wrote confirming the decision on reconsideration stating that the fact that the assessment for £2,652 would not have been raised if the Appellant had been on the Scheme was not “in itself” sufficient reason to backdate the Scheme.  The letter stated that the Appellant would need leave to appeal out of time.

9.	Mr Holl did not take any point on the appeal being out of time and we gave leave.

10.	Under regulation 55B(1) of the VAT Regulations 1995, Customs,

“may … authorise a taxable person [to use the Scheme] with effect from 
(a)	the beginning of the 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.”

11.	On an appeal under the Value Added Tax Act 1994, s.83(1)(fza) refusing authorisation to use the Scheme the powers of the Tribunal are limited by section 84(4ZA) as follows,

“the Tribunal shall not allow the appeal unless it considers that the Commissioners could not reasonably have been satisfied that there were grounds for the decision.”

12.	In Revenue and Customs Commissioners v Burke [2009] EWHC 2587 (Ch) Henderson J said at [21] that this set a high threshold and was in essence a supervisory jurisdiction, citing John Dee Ltd v Customs and Excise Commissioners  [1995] STC 941.

13.	The only ground advanced was that the Appellant had not been advised of the Scheme at the visits in April 2007 and earlier.  There is nothing on the file to suggest that the Appellant was advised of the Scheme at the visits and we accept this.  However the Appellant did not suggest that the Notes had not been received.

14.	In Burke Henderson J said that in his view the visiting officer in that case was plainly under no duty to raise the question of the flat rate scheme.  

15.	The reasons for the decision were set out in the letter of 23 June 2008, see paragraph 7 above.  There is in our judgment nothing in those reasons which is unreasonable.

16.	The only point which could have been made is purely technical.  The authorisation was not with effect from the beginning of the next prescribed accounting period after the application, since that would have been 1 September 2007.  Nor was the choice of an earlier date by agreement within regulation 55B(1)(b) of the 1995 Regulations.  Mr Pusser very sensibly did not raise this point because logically it would lead to later authorisation rather than earlier.

17.	The result is that the appeal is dismissed.

18.	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.

THEODORE WALLACE
TRIBUNAL JUDGE

RELEASE DATE:18 January 2011