20972

Deregistration - claim for backdating under Para.13(1) of the First Schedule to the 1994 Act to time turnover fell below the deregistration limit and not to the making of the application to deregister  -  claim that VAT charged and paid to Customs during the period before deregistration but while turnover was below the deregistration limit should be refunded - appeal dismissed.

LONDON TRIBUNAL CENTRE

	KEITH SAVIDGE (KCS T/A CAR SPA)	           Appellant

-	and –

	THE COMMISSIONERS FOR HER MAJESTY’S REVENUE & CUSTOMS 	 Respondents

				Tribunal:	ELSIE GILLILAND (Chairman)

Sitting in public in London on 29 January 2009

The Appellant in person

Gloria Orimoloye, Counsel, instructed by the General Counsel and Solicitor to Her Majesty’s Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2009

DECISION

1.	The appeal is against the refusal of Customs to agree to the Appellant’s request that he should be deregistered for Value Added Tax (VAT) with effect from April 2007 and to agree that he was not liable to account for VAT in respect of the period from April 2007 up to 26 September 2007. The Appellant is Keith Savidge who traded as Car Spa. He has presented the appeal before the tribunal and has given evidence.

2.	The paperwork before me shows that by form VAT 7 dated 24 September 2007 the Appellant applied to cancel his registration for Value Added Tax (VAT). The application was received by the Respondents on 26 September 2007.  There was a delay on the part of the Respondents in dealing with the application but ultimately, and after the provision of some further information by the Appellant, Yvonne Kilford, an Officer in the Respondents’ National Registration Appeals Team, by a letter dated 5 February 2008 agreed on behalf of the Respondents that the Appellant should be deregistered as from 26 September 2007. Yvonne Kilford attended and has given evidence at the hearing. The Appellant, however, had in an earlier letter dated 30 January 2008 requested that he should be deregistered as from the beginning of the 2007 financial year but in her letter dated 5 February 2008 Yvonne Kilford in reliance on paragraph 13(1) to Schedule 1 to the Value Added Tax Act 1994 (the  Act) refused this request. Paragraph 13(1) provides (subject to paragraph 13(4) which is not applicable in the present case) that “where a registered person satisfies the Commissioners that he is not liable to be registered under this Schedule, they shall, if he so requests, cancel his registration with effect from the day on which the request is made or from such later date as may be agreed between them and him”. In her letter Yvonne Kilford also made clear that the Appellant was bound to account for VAT on his supplies made up to 26 September 2007.

3.	The Appellant was the sole proprietor of a car valeting business operating in London and in March 2005 when he was about to set up the business, he applied for voluntary registration. He was duly registered for VAT with effect from 21 March 2005. At that time he estimated that his taxable turnover during the next 12 months would be £100,000. The Appellant appears to have traded successfully in 2005 and 2006 but in 2007 his turnover declined. In Option A of form VAT 7 the Appellant attributed this decline as being “due to other economic restraints on customers they do not have their cars cleaned so often with the increase in congestion charge, parking fees, petrol costs etc. their disposable income was reduced drastically. Also, a number of businesses are moving out of London and others are simply not driving in”. He confirmed these reasons in his oral evidence. On form VAT 7 the Appellant also stated that the total taxable supplies he expected to make during the next 12 months would be £55,000. Prior to submitting form VAT 7 the Appellant had on 19 September 2007 contacted the Respondents’ National Advice Centre by telephone. He said that his turnover had fallen below the deregistration threshold and he asked what he should do. A VAT deregistration pack was sent to him and he then submitted  form VAT 7 requesting deregistration. The form under item (iv) in Option A stated that deregistration on reduced turnover grounds could not be backdated and that if the application were accepted the registration would be cancelled from the date the Respondents received the application and that if he wanted the registration to be cancelled from a future date he should specify the date below. Against this the Appellant had written “on receipt”. The box for insertion of a date from which the registration was to take effect was left blank but marked N/A.

4.	I accept the Appellant’s evidence to the tribunal that his turnover since April 2007 has been below the limit for deregistration and the figure of £55,000 has not been queried by the Respondents. There is no dispute that during the period from April 2007 until he was deregistered with effect from 26 September 2007 the Appellant charged his customers VAT at the standard rate and issued invoices and has accounted for this VAT (less input tax) to the Respondents. As I understand it, from a reply of the Appellant to a question from me, the net amount paid to the Respondents in respect of this period was just over £3000. It is clear that the Appellant wishes to recover this VAT and the present appeal is being pursued with a view to obtaining repayment on the basis that VAT has been paid to the Respondents which was not due to them. The Appellant in para.7 of his letter attached to his Notice of Appeal says: “To put it simply, from April 2007 to 26 September, I paid VAT to HMR&C which was not legally due in that my business turnover was below the limit”.

5.	There are it seems to me 2 distinct but related issues which arise in this appeal. The first is whether the Appellant’s deregistration should have taken effect from April 2007 and not just from 26 September 2007. The second is whether, as the Appellant contends, European law and in particular the observations of the Advocate General in the Marks & Spencer case (Case C-309/06), entitle the Appellant to repayment  of the VAT from April until 26 September 2007. The Appellant has submitted that nowhere in the legislation is it said that he cannot recover the VAT in question.             

6.	So far as the first issue is concerned, Paragraph 13(1) of the First Schedule to the Act is clear and provides that the registration is to be cancelled with effect from the day on which the request for deregistration is made or from a later agreed date. The decision to deregister the Appellant from 26 September 2007 was in my view in full accordance with Paragraph 13(1). The Appellant was clearly a registered person within Paragraph 13(1) and he satisfied the Respondents that he was not liable to be registered under the First Schedule by satisfying them that the value of his expected taxable supplies was below the level at which he was required or liable to be registered. Liability to be registered is dealt with in Paragraph 1 of the First Schedule to the Act and depends upon the value of taxable supplies exceeding the registration limit. In the case of the Appellant, he was no longer liable to be registered because although he was still making taxable supplies, their value did not exceed the limit at which registration was required.

7.	The Appellant was unrepresented and although he did not refer to Paragraph 13(2) of the First Schedule, I have considered whether that provision could assist the Appellant. At first sight it might appear that that provision could assist the Appellant. That paragraph permits the Respondents to deregister a registered person with effect from the day on which he ceased to be registrable, but on closer examination that provision does not actually assist the Appellant because, although no longer required to be registered, the Appellant was still in my view a registrable person during the period from April to 26 September 2007. Registrable in the First Schedule to the Act is defined as meaning “liable or entitled to be registered”. See Paragraph 18. Further by Paragraph 13(5) of the First Schedule the Respondents are prohibited from deregistering a person under paragraph 13(2) from the day on which he ceased to be liable to registration unless they are satisfied that on that day he was not either liable to be registered or entitled to be registered. The double negative is not perhaps as happily expressed as it might have been, but the sense is in my view clear. The Respondents cannot deregister a person under Paragraph 13(2) if that person on the relevant date was either liable to be registered or entitled to be registered. If he had been deregistered from April the Appellant would still have been entitled to be registered pursuant to paragraph 9 of the First Schedule and thus is excluded from Paragraph 13(2). Although the point has not been argued, I consider that Paragraph 13(2) is probably directed to the situation where a registered person ceases to make any taxable supplies and does not intend to make taxable supplies so that he is neither liable to be registered nor entitled to be registered on a voluntary basis.

8.	The Appellant placed considerable reliance on the Marks & Spencer case. In my view the Marks & Spencer case does not assist on the question of what is the proper date for the deregistration of the Appellant. The observations of the Advocate General upon which the Appellant seeks to rely are to the effect that traders are entitled to the correct application of national VAT rules and had a right to a refund of any VAT wrongly charged or paid. The relevant national VAT rule in the present case in relation to the date from which a deregistration takes effect is to be found in Paragraph 13(1) of the First Schedule to the Act. As I have already stated, that provision was correctly applied by the Respondents when determining that the date from which deregistration was effective was 26 September 2007. Paragraph 13(1) does not contain any provision which would enable the registration to be backdated to before  the making of the application and any such backdating would be inconsistent with the clear wording of Paragraph 13(1).

9.	So far as the second issue is concerned, again it does not seem to me that the principle of the Marks & Spencer decision is of assistance to the Appellant. That case concerned the question whether   Marks & Spencer was prevented on the grounds of unjust enrichment from recovering the standard rate VAT which it had paid and accounted for on the sale of teacakes when the teacakes were in law entitled to be zero rated. It was in this context that the Advocate General made the observations referred to. In that case it was clear that VAT had been paid when it should not have been. In the present case the question is whether the VAT which the Appellant paid between April and 26 September 2007 was “wrongly paid”. I am satisfied and hold that the VAT which the Appellant paid during this period was properly paid and that it cannot be said to have been wrongly paid. The position at the time this VAT was charged by the Appellant was that he was duly registered for VAT and had been so registered since 21 March 2005 pursuant to his application for voluntary registration. The supplies which the Appellant made during this period were supplies in the course of his car valeting business and as such were taxable supplies within section 4(2) of the Act which provides: “A taxable supply is a supply of goods or services made in the United Kingdom other than an exempt supply”. Car valeting services are not exempt supplies. Further, the Appellant was a taxable person within Section 3(1) of the Act because he was in fact registered. The obligation on a taxable person to pay and account for VAT in respect of supplies of goods or services made by him is to be found in Section 25 of the Act which provides that a taxable person must pay and account for VAT (less any input tax) at such time and by reference to such periods as may be determined by or under regulations. The liability for VAT under Section 1(2) of the Act rests upon the supplier. 

10.	The Appellant’s contention is that because his taxable turnover was below the deregistration limit the VAT which he charged his customers between April and 26 September 2007 and which he accounted for to the Respondents was wrongly paid to the Respondents. The Appellant has also pointed out that there is no provision in the Act which states in terms that he is not entitled to be repaid this VAT. However, there is in my view no basis for the contention that where VAT has been charged and accounted for by a registered trader whose turnover is below the deregistration limit, such payment is to be regarded as having been made wrongly. So long as the Appellant was actually registered for VAT he was under Section 25 of the Act obliged to pay and account for VAT on his taxable supplies. This is the reason why there is no express provision stating that VAT is not repayable in such circumstances. Section 25 of the Act by imposing a liability on the taxable person to pay and account for VAT to the Respondents necessarily excludes any obligation on the Commissioners to repay such VAT. The Appellant’s contention is, I am satisfied, not only inconsistent with the provisions of Section 25 of the Act but is also inconsistent with the principle of voluntary registration which enables a person whose turnover is below the registration limit to register for VAT even though he is not obliged to do so. Once registered however, it then becomes his obligation under Section 25 of the Act so long as he remains registered to pay and account for VAT on his supplies, notwithstanding that his turnover may be below the limit for registration. In my view there has been no failure on the part of the Respondents correctly to apply the national law which is to be found in the Act and in the First Schedule and I hold that no VAT has been wrongly charged or paid by the Appellant in respect of the period from April to 26 September 2007, nor has there been any inequality of treatment. Accordingly no question of unjust enrichment can arise, such as was considered in the Marks & Spencer case.

11.	The same result can be reached by a consideration of Section 80 of the Act. That section provides that if a person has paid an amount to the Respondents by way of VAT which was not VAT due to them, he is entitled to be repaid that amount. In order to be entitled to repayment it must be shown that the amount paid was not VAT due to the Respondents. However for the reasons already stated, the Appellant was, so long as he remained registered for VAT, obliged under Section 25 to pay and account for VAT on his taxable supplies and it cannot in my view be said that the VAT which the Appellant paid was not VAT due to the Respondents within Section 80. Accordingly there can be no entitlement to be repaid under Section 80. 
 
12.	The appeal is dismissed. 

13.	The Respondents have not sought a direction as to costs and I make no direction as to costs.                                                                                                                                                                                                                                              

ELSIE GILLILAND
CHAIRMAN

RELEASED: 9 March 2009

LON 2008/0629