[2009] UKFTT 250 (TC)

TC00198

REGISTRATION FOR VAT – electronic application on form VAT1 stated wrong date for voluntary registration – request in respect of cancellation of registration and for registration from a later date being treated by the Commissioners as a request for an amendment of the effective date of registration – request refused – tribunal’s jurisdiction under s.83|(a) VATA, 1994.

Held that the decision taken unilaterally by the Commissioners to treat the appeal requesting cancellation of registration and request for registration from a later date as a request for an amendment of the effective date of registration was flawed – S.84 (10) VATA applied – appeal partially allowed and a further independent review directed.

LONDON TRIBUNAL CENTRE

MODIFIED GUMBALL RALLY LIMITED
known as MODBALL LIMITED
and
THE COMMISSIONERS OF HER MAJESTY’S 
REVENUE AND CUSTOMS	Appellant

Respondents	
		
Tribunal:     RODNEY P HUGGINS FCI Arb (Chairman)
                                             SUNIL K DAS ACIS

Sitting in public in London on 28 September 2008, 23 March and 10 July 2009

Mr J Y Bougerie, Director, for the Appellant.

Mr Jonathan Holl, Advocate from the Office of the Solicitor for Her Majesty’s Revenue and Customs for the Respondents 

© CROWN COPYRIGHT 2009
DECISION

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	The appeal

1.  Modball Limited (formerly Modified Gumball Rally Limited) (“the Appellant”) appeals against a decision of the Commissioners for Her Majesty’s Revenue and Customs (“Customs”) contained in a letter dated         6 February 2007 refusing a request to amend an Effective Date of Registration (“EDR”) from 29 November 2006 to 1 March 2007.

The legislation

2.   The enabling provision for registration for VAT is contained in section 3 of the Value Added Tax Act 1994 (VATA) which states :

        “(1)    A taxable person is a taxable person for the purposes of this Act 
                   while he is, or is required to be registered under this Act.

          (2)    Schedules 1 to 3A shall have effect with respect to registration”.

3.   Section 4 sets out the scope of VAT on taxable supplies and sub-section 1 provides “VAT shall be charged on any supply of goods or services made in the United Kingdom, where it is a taxable supply made by a taxable person in the course or furtherance of any business carried on by him.”

4.   The relevant parts of Schedule 1 of VATA as applicable to this appeal are as follows :

        “1(1)  Subject to paragraphs (3) to (7) below, a person who makes 
        taxable supplies but is not registered under this Act becomes liable to be
        registered under this Schedule –

        (a)   at the end of any month; if the value of his taxable supplies in the
        period of one year then ending has exceeded £61,000; or
        (b)   at any time, if there are reasonable grounds for believing that the
        value of his taxable supplies in the period of 30 days then beginning will 
        exceed £61,000 …

[NOTE: The threshold of £61,000 was that in existence in the tax year 2006/2007]

Notification of liability and registration

5.    (2)  The Commissioners shall register any such person [viz a person who
       becomes liable to be registered by virtue of paragraph 1(1)(a)] (whether
       or not he so notified them [i.e. whether or not he notified them of the
       liability within 30 days of the end of the relevant month or from such
       earlier date as may be agreed between them and him.” (By paragraph
       5(3),  “the relevant month” means the month at the end of which a person 
       becomes liable to be registered by virtue of paragraph 1(1)(a).) …

6.   (1) A person who becomes liable to be registered by virtue of paragraph
      1(1)(b) above shall notify the Commissioners of the liability before the 
      end of the period by reference to which the liability arises

      (2)  The Commissioners shall register any such person (whether or not he
      so notifies them) with effect from the beginning of the period by reference
      to which the liability arises.

Entitlement to be registered

9.    Where a person is not liable to be registered under this Act and is not
       already so registered satisfies the Commissioners that he –

       (a)   makes taxable supplies ; or
       (b)  is carrying on a business and intends to make such supplies in the
       course or furtherance of that business,

      They shall, if he so requests, register him with effect from the date on 
      which the request is made or from such earlier date as may be agreed
      between them and him …

10. (1)  Where a person who is not liable to be registered under this Act and is
      not already so registered satisfies the Commissioners that he –

      (a)   makes supplies within sub-paragraph (2) below; or
      (b)  is carrying on a business and intends to make such supplies in the
            course or furtherance of that business,
            and (in either case) is within sub-paragraph (3) below, they shall, if he
            so requests, register him with effect from the day on which the request
            is made or from such earlier date as may be agreed between them and
            him …

Notification of end of liability or entitlement

11.    A person registered under paragraph 5, 6 or 9 above who ceases to make
         or have the intention of making taxable supplies shall notify the
         Commissioners of that fact within 30 days of the day on which he does
         so unless he would, when he so ceases, be otherwise liable or entitled to 
         be registered under this Act if his registration and any enactment
         preventing a person from being liable to be registered under different
         provisions at the same time were disregarded…

12.   A person registered under paragraph 10 above who –

        (a)   ceases to make or have the intention of making supplies within sub-
        paragraph (2) of that paragraph; 
        or
        (b)   makes or forms the intention of making taxable supplies, shall notify
        the Commissioners of that fact within 30 days of the day on which he 
        does so unless in the case of  person ceasing as mentioned in sub-
        paragraph (a) above, he would, when he so ceases, be otherwise liable or
       entitled to be registered under this Act if his registration and any
       enactment preventing a person from being liable to be registered under 
       different provisions at the same time were disregarded.

Cancellation of registration

13.   (1)  Subject to sub-paragraph (4) below, 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.

        (2)  Subject to sub-paragraph (5) below, where the Commissioners are 
        satisfied that a registered person has ceased to be registrable, they may
        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.

        (3)  Where the Commissioners are satisfied that on the day on which a
        registered person was registered he was nor registrable, they may cancel 
        his registration with effect  from that date.

        (4)  The Commissioners shall not under sub-paragraph (1) above cancel a 
        person’s registration with effect from any time unless they are satisfied
        that it is not a time when that person would be subject to a requirement to
        be registered under this Act.

        (5)   The Commissioners shall not under sub-paragraph (2) cancel a
        person’s registration with effect from any time unless they are satisfied 
        that it is not a time when that person would be subject to a requirement, 
        or entitled, to be registered under this Act.
      
        (6)   In determining for the purposes of sub-paragraph (4) or (5) above
        whether a person would be subject to a requirement, or entitled, to be
        registered at any time, so much of any provision of this Act as prevents a
        person becoming liable or entitled to be registered when he is already
        registered or when he is so liable under any other provision shall be
        disregarded.

       (7)   In this paragraph, any reference to a registered person is a reference
        to a person who is registered under this Schedule

       (8)   This paragraph is subject to paragraph 18 of Schedule 3B
       (cancellation of registration under this Schedule of persons seeking to be
       registered under that Schedule, etc) …

       18. In this Schedule “registrable” means liable or entitled to be registered 
       under this Schedule …”

The tribunal’s jurisdiction

6.   Subject to section 84 of VATA, the tribunal’s relevant jurisdiction is that provided by section 83(a) of VATA namely jurisdiction to hear and determine an appeal “with respect to … the registration or cancellation of any person under this Act …”

7.    Section 84 sets out further provisions relating to appeals including

       “(10)  Where an appeal is against a decision of the Commissioners which
       depended upon a prior decision taken by them in relation to the appellant,
       the fact that the prior decision is not within section 83 shall not prevent
       the tribunal from allowing the appeal on the grounds that it would have 
       allowed an appeal against the prior decision.”

The issue

5.   The Appellant argued that its application to register was made online and the incorrect date of registration was entered. It should have been at a future date three months later.  The error was brought to the attention of Customs who refused to adjust to the correct date.

9.   The Respondents contended that :

      (i)   The Appellant made an application to register for VAT on a voluntary
             basis under the provisions of paragraph 9 of Schedule 1 of the VATA
             which provides :

       “9  Where a person who is not liable to be registered under this Act and is
       not already so registered satisfies the Commissioners that he –

       (a)  makes taxable supplies: or
       (b)  is carrying on a business and intends to make such supplies in the
             course or furtherance of that business,

they shall, if he so requests, register him with effect from the day on which the request is made or from such earlier date as may be agreed between them and him.”

     (ii)  The application to amend the EDR did not fall within the areas allowed
            for by the Respondents; there was no official error in processing the
           application and that there was no evidence to show that the Appellant
           was liable to be registered from an earlier date that that applied for.

The evidence

10.  Oral evidence for the Appellant was given by Mr Jean Yves Bougerie (“Mr Bougerie”), its Director.

11.    A file of documents was produced by Customs.  Mr Paul Marchant (“Mr Marchant”) an Administrative Officer of Customs employed at the VAT Registration Unit at Deansgate, Wolverhampton, gave evidence for the Commissioners.  

The facts

12.  From the evidence before us we find the following facts.

13.   Mr Bougerie organises and sells car rallies within Europe.  He advertises for teams who pay initial deposits in order for a team to be registered.  In 2006 the initial deposit was £295 for a single driver and £590 for two.  The total entry fee was £1,100.
14.  He decided to form a Company in order to run this sporting activity and registered his Company on 3 July 2006.  He ran the Company with the assistance of a part-time book-keeper and received professional advice from Tax Assist who acted as his Accountants.  They told him that the VAT threshold was £6,000.  A projection of the Company’s income was drawn up and it was anticipated that the first year’s sales would be £150,000 but the bulk of the income would actually be received in March and April 2007.  It was agreed between Mr Bougerie and Tax Assist that registration for VAT would not be necessary until the VAT threshold would be reached and the earliest date was estimated to be 1 March 2007.

15.  The Appellant did not charge VAT on the deposits from rally application entry forms when it began trading in November 2006 and this did not occur until after  March 2007.

16.  Mr Bougerie decided that he would complete the electronic version of the VAT registration application form at the end of November 2006 as he thought it could take up to ten weeks to go through and he wanted to pre-empt the process.  He instructed his book-keeper (a Mrs Jill Anderson) to bring the Application form up on screen as she was operating the computer in the studio room which was being used as the Appellant’s office premises.  Mr Bougerie was present sitting near Mrs Anderson and also present helping was his landlord (a businessman) trading as Advanced Regulatory Solutions Limited who had been involved in a similar situation in March 2006 when his Company was allowed by Customs to alter an EDR.

17.   Mrs Anderson inserted the Registration details on the computerised registration form “29/11/2006” as the date when the Appellant “first made taxable supplies”.  The estimate of expected taxable turnover in the 12 months was given as £150,000 which was the projected figure.

18.   Mrs Anderson then endeavoured to insert 1/03/2007 as the date from when the Appellant would like the registration to commence.  The screen form did not allow this to be inserted. The date of 29/11/2006 (which was the date when the operation was taking place) flashed up but Mrs Anderson, through inexperience, decided to proceed and struck the “submit” button.  No hard copy was taken for the form.  Mr Bougerie was under the impression that his Company’s application for registration would only become effective after 1 March 2007.    He did not physically see what Mrs Anderson did on the computer and assumed all was in order for March 2007 as the effective registration date.

19. In the first half of January 2007, the Appellant received an acknowledgement from Customs that they had registered the Appellant for VAT from 29/11/2006 which was the date entered on the Appellants’ electronic registration application form.  The registration number allocated was 893 8446 66.

20. Mr Bougerie contacted his Accountants, Tax Assist, immediately and they telephoned Customs explaining what had happened and then wrote to Customs Variations Unit at Carnbane Way, Damolly, Newry, County Down. Northern Ireland on 17 January 2007 as follows :
           “Following to our conversation over the phone, we have been
           advised to write the request to you to change the effective date as stated 
           on the Certificate of Registration.  Please note that the registration date
           should  be 01/03/2007 and not 29/11/2006.

           If you have any queries please direct these to us.”

21     Customs Officer Mr Gareth Stephen replied to the Accountant’s letter on 6 February 2007 and the relevant part of the letter reads as follows :

         “I am writing in response to your letter of 17/01/07 requesting an
           amendment to your effective date of registration.

         I have to advise you that, under the provisions of paragraphs 5, 6, 9 and
         10 of schedule 1 to the VAT Act 1994 we are not obliged to amend the
         effective date of registration which was based on the information you
         supplied on form VAT1 Application for VAT Registration.  The only
         circumstances where we may vary your date of registration is if :

            there has been a departmental error during the registration process; or

            information comes to light to indicates that you were liable to be 
              registered from an earlier date

        There is no evidence to suggest this and no other sufficient grounds have
        been supplied to support the request to change this date  Therefore on the     
        basis of the information supplied on your application dated 29/11/2006 
        your effective date of registration must remain as 29/11/2006.

       If you disagree with a decision made by HM Revenue and Customs you
       can ask for it to be reconsidered, You should so this if you can provide
       further information, or there are facts which you think may not have been
       fully taken into account …”
22.  Ms Debbie Corbett of Tax Assist telephoned the HMRC National Registration Service Office in Newry, County Down on 8 February 2007 immediately she had received the letter of 6 February.  She spoke to a Ms Helena McInerry who told her that she had checked the VAT1 registration form and agreed with Mr Gareth Stephen’s decision that “the trader had got the date he requested”.  As the guidance only allowed change in the two situations outlined in the 6 February 2007 letter, no change could be made.  Ms Corbett was not happy with the decision and was advised she could request an independent review.
23.  The Appellant appealed on 21 March 2007.  The grounds of appeal were “this application was made online and the incorrect date of registration was entered.  It should have been 01 March 2007 but the machine defaulted to the date of the application.  This error was immediately brought to the attention of HMRC who have refused to adjust to the correct date. 

24.  On 10 September 2007.  Tax Assist, on behalf, of the Appellant, submitted a “Statement of Defence” in which they stated in paragraph 10:-

      “(10) We enclose the sales lists for Modball Limited. The company
      exceeded the £61,000 gross turnover for 2006 on 31 Match 2007 and were
      thus legally obliged to register on 01 May 2007.  The company did not
      factor in VAT on their sales and their clients were not VAT registered.
      Further, the company had little in the way of VAT inputs to claim back.
     Gross sales as of the end of April (document 1) were £111,238,21.  It is 
     estimated that the error in the VAT date application has cost the company
     £15,205.37 in output tax.  If the VAT registration had been amended to 01
     March 2007 as we requested initially – then this figure would actually
     amount to £6,810 in output tax.  It is morally incorrect for customs and
     excise to advance their position due to what is at worse an inadvertent 
     mistake on the part of an extremely busy new director of a small limited
     company.  It is immoral to penalise a company many thousands of pounds
     simply because of an administrative mix up.

     (11)  Mr Bougerie’s profit for his first year is anticipated to be in the region
     of £12,000. The VAT error this represents a substantial amount in relation 
     to his first year profits.”

The registration process online

25.  Mr Marchant told the tribunal and it as accepted that in order for an online VAT registration to be submitted an applicant has to access the HMRC online service and follow a sequence of screens and answer the questions displayed within each screen.  The precise path followed by an applicant though the process is determined by the type of application which is being submitted.  Each screen to be competed may contain a combination of both mandatory and optional items of information.  The online service provides an applicant with help screens and hint text held which provided additional information to assist in completing the form.

26.   The fields on the online screen are not pre-populated with the correct date (when the application is being made) or any default date: a valid date, month and year must be keyed or selected as appropriate by the applicant.  However, if a date is chosen by an applicant more than three months in advance, then the system would come up with a designation of “error” in the system.  The system prevents the user from submitting a partially completed application having entered date information which is insufficient, incomplete or invalid.

27.   An applicant has to navigate through all the relevant pages of the online application, entering information as required in order to reach a check and submit page. Incomplete information cannot be processed.  The system requires complete information at all times.

The Respondents’ arguments at the appeal

28.   Mr Holl, for the Commissioners, was quite brief in his submission.  He said that the burden of proof was with the Appellant.  An application for registration had been made online on a computer in the Appellant’s office.  The system was robust.  If the date required by the Appellant was well in advance then the system would have defaulted and the Appellant should have “saved and exited” rather than submit a wrong date which in the Appellant’s case was the date the computer was being used, namely 29 November 2006.

29.   He maintained there was no official error in the computer system. There was nothing wrong with it.  The book-keeper should not have inserted the current date when the Appellant really wanted 1 March 2007.

30.  Mr G Stephen for HMRC made it quite clear in his letter of 6 February 2007 that under the provisions of paragraphs 5, 6, 9 and 10 of Schedule 1 to VATA, HMRC were not obliged to amend the effective date of registration which was based on information supplied by the Appellant online on form VAT1.  Mr Holl re-iterated that the only circumstances where they may vary the date of registration was if (i) there had been a Departmental error during the registration process; or (ii) information came to light to indicate the Appellant was liable to be registered from an earlier date.  Mr Holl said that there was no evidence to suggest these circumstances applied and no other sufficient grounds had been supplied to support the request to change the date.

The Appellant’s arguments at the appeal

31.  On behalf of his company, Mr Bougerie said that his Accountants had done all they could to alter the date immediately the error had been discovered. He agreed that it was now realised his company’s book-keeper had not dealt with the application correctly but Mrs Anderson had endeavoured to carry out his instructions and because of lack of knowledge of the process inadvertently registered the wrong date.

32.  Mr Bourgerie pointed out that a similar situation had occurred with his landlord’s company, Advanced Regulatory Solutions Limited earlier in 2006 and Tax Assist had also been the Accountants.  When it was realised that an incorrect registration date had been inserted in the Registration Application form Tax Assist, after telephoning, wrote to the HMRC Variations Unit on 21 March 2006 stating “Following to our conversation over the phone today …” we have been advised to fax this request to you to change the Effective date as stated in the Certificate of Registration.  Please note that the registration date should be 01/12/2005 and not 01/10/2005…”  This was exactly the same position as occurred in the current appeal and Mr Bougerie could not understand why a different stance was taken by HMRC since in that case approval was given on 9 March 2006.

The tribunal decision in S Daniels & S Stevenson (trading as Homeforce) v The Commissioners of Customs and Excise [2002] VATDR 591 (VTD 17948)

33. Shortly after the hearing of the appeal had taken place, the tribunal became aware of the above tribunal decision (Homeforce) which involved similar circumstances.  There were issues as to the jurisdiction of the tribunal and whether an Appellant’s request to amend a registration date should have been understood by the Commissioners as a request to cancel the original registration and re-register at a later date.

34.  The decision in Homeforce and its issues had not been drawn to the attention of the tribunal at the hearing.

35.  Briefly the facts in Homeforce were as follows.  On 10 October 2000 a partnership applied for registration with effect from 1 November 2000 although its turnover had not then exceeded the statutory threshold.  The date of 1 November was wrong as in fact the partnership’s turnover did not exceed the threshold until the end of November.
36.  It was not until 27 June 2001 that the representatives of Homeforce wrote to the Commissioners in terms appealing against registration from                   1 November 2000 and requesting registration from 1 December 2000 amended in a further letter of 19 July 2001 to a request for registration from    1 January 2001. 

37.   The Commissioners did not at any time treat this as a request to cancel the existing registration and re-register the Appellants from a new date but throughout as a request to amend their effective date of registration. Something that the Commissioners were prepared to allow in certain circumstances under an unpublished policy in the exercise of their general care and management powers.

38.  On appeal against a decision, after it had been confirmed on review, to refuse to amend the Appellants contended that the Tribunal had jurisdiction under VATA section 83 (a) of VATA to amend the effective date of registration and their request should have been understood by the Commissioners as a request for cancellation and re-registration from               1 January 2001.  The case for the Commissioners was, first, that the Tribunal had no jurisdiction to do anything at all on the hearing of the appeal and, as a secondary submission, that the Tribunal in the exercise of its supervisory jurisdiction could only inquire into the reasonableness of the decision to refuse and make a declaration;  it had no jurisdiction to amend the effective date of registration.

39.  The headnote to the decision in Homeforce in the Value Added Tax and Duties Tribunals reports [2002] Part 4 at page 592 reads as follows :

      “Held, (1) that on a broad construction of section 83(a), which is to be
      preferred, the Tribunal has jurisdiction to hear and determine an appeal,
      where, in broad terms, the registration of any person is in issue (paragraph 
      40) :

      (2)  that the Tribunal’s  jurisdiction is appellate and not supervisory and,
      whereas it could not direct the Commissioners to apply their policy on
      amending an effective date of registration in the Appellant’s favour, the
      Tribunal can and should decide whether their decision “with respect to the
      registration or cancellation of registration” of the Appellants was flawed
      by considering whether they had acted in a way that no reasonable panel
      of Commissioners could have acted or whether they have taken into
      account some irrelevant matter or have disregarded something to which
      they should have given weight (paragraphs 42 to 47);

    John Dee Ltd v Customs and Excise Commissioners [1995] STC 941, CA,
    per Neill LJ at page 952, and Customs and Excise Commissioners v J H
   Corbitt (Numismatists) Ltd [1980] STC 231, HL, followed.

    (3)  that the Commissioners’ decision through their officer to refuse
    amendment, because in her view there were no inconsistencies on the form
    VAT1 as submitted, was flawed because in considering the answers given
    she had failed to have regard to the actual terms of the registration scheme
    which the questions on the form are designed to implement (paragraphs 72
    and 73);

   (4)  that the appeal would also be allowed under section 84(10) as the “prior 
   decision” unilaterally to treat an appeal against registration as a request for 
   amendment of an effective date of registration without taking steps to ensure
   that the difference was appreciated by the Appellants was unreasonable and
   thus flawed (paragraphs 74 and 75).

   Appeal allowed with costs and direction made that the Appellants’ request
   be further reviewed.”

40.  The tribunal drew the attention of the parties to the decision in Homeforce in a Direction issued shortly after the hearing giving the parties an opportunity to present in writing their arguments on the issues raised in the Homeforce decision. Their further arguments are summarised as follows :

The Respondents’ further arguments after the hearing

41. On behalf of the Solicitor and General Counsel of HMRC a written submission dated 18 May 2009 made the following points.

(1) The decision in Homeforce was a decision of a similarly constituted tribunal and as such was not binding upon the tribunal considering this appeal, although it may be considered to be persuasive.

(2)  Homeforce can be distinguished from the current appeal on the facts as Homeforce completed a paper VAT1 ‘Application for registration.’

(3)   Every person should acquaint himself with the information available from the Commissioners about the requirements for registering for VAT, in the first instance from the leaflets and Notices freely available and where doubt or difficulty arises then either a written or verbal enquiry. Examples were given from the Customs Notice 700/1 ‘should I be registered for VAT  ?’  which was available to the Appellant.
The relevant Notes then quoted were as follows :

“H M Revenue & Customs.  Applying to register for VAT – additional information to help you VAT 1 (Notes)

Note 1.3  Are you applying for voluntary registration ?

You can apply for voluntary registration where your turnover does not go over the registration threshold, or where you intend to trade but your business has not started yet.

Enter the date you would like to be registered from.  We cannot accept a date that is more than three years before the date of your application.  Sometimes we may ask for evidence from you about the supplies that you are making or intending to make.

Important -  the date you put there, once we have agreed it, will be your registration date,  You must account for output tax on all your taxable supplies from that date.  Once a date is agreed, you cannot change your mind and ask us to alter your voluntary registration to a different date.  We will only agree to change the date of registration in exceptional circumstances …

2.9  Can I still be registered if I am not liable to be registered ?

Yes. If you are not liable to be registered because the value of your taxable supplies, distance sales, or acquisitions is below the thresholds you can apply for voluntary registration.  You can also apply to register prior to making taxable supplies, distance sales or acquisitions.  In all cases you should think carefully whether registering will really benefit you.  If we agree to register you from an earlier date, you

  Must account for VAT on all your (non zero-rated) taxable supplies, distance sales and acquisitions from that date;

 Cannot normally apply later to change the date : and

 Can recover input tax incurred in respect of your taxable supplied from that date …

4.2  When must I notify you ?

When you are liable to register because at the end of any month the value of your taxable supplies in the last 12 months or less has exceeded the threshold. or the value of your relevant acquisitions has exceeded the threshold, you must notify us within 30 days from the end of the month that this occurred …

12.   Errors, late notification and fraud  

2.1   What if I get my registration date wrong ?

It is important to get your registration date right.  If we find out later you should have been registered from an earlier date, you will have to pay us the VAT on the (non zero-rated) taxable supplies you made from the earlier date.  You may also e liable for a late registration penalty …”

(4)  The Commissioners argued that both Homeforce and the Appellant had access to Notice 700/ and should have been aware of the contents.

(5)   It was pointed out by Customs that there were inconsistencies in the completion of the ‘Homeforce’ VAT 1 form and the tribunal had found that ‘Homeforce’ had completed VAT1 incorrectly and at the wrong time.  The Appellant at the date of completing the electronic VAT was not required to register and was applying for registration on a voluntary basis.

(6)  The Commissioners then analysed (as they saw it) the Appellant’s position.  They pointed out that on 17 January 2007, no request or application was received from the Appellant to cancel its registration only to amend the date that had been notified

On the day that the Appellant was registered under paragraph 13(3) of Schedule I to VATA it was registrable as defined in paragraph 18 to Schedule 1 and paragraph 9(b) to the same Schedule.

Examples were given of where there were, in the opinion of Customs, in fact and in law clear differences that distinguish the two appeals.

In conclusion, the Commissioners submitted that the letter of 17 January 2007 was not a request to cancel the existing registration and the grounds of appeal did not include a reference to the Commissioners having to consider cancellation of the registration.

The Appellant’s further arguments after the hearing.

42.  The Appellant, through its Director Mr Bougerie in a written submission dated 29 April 2009 argued that its case contained very similar circumstances to those in the case of Homeforce.
After outlining the facts in both Homeforce  and the Appellant’s case, Mr Bougerie said :

      “On receipt of this confirmation showing an EDR (Effective Date of
      Registration) of 29 November 206, HMRC were contacted, initially by
      telephone, to advise of the incorrect EDR.  The telephone advice given at 
      the time was that we should submit a written request to HMRC for 
      amendment of the EDR.  Accordingly, such a request based on the advice
      given by HMRC was submitted.

     It is therefore believed that both the Homeforce case and our case contain
     the same features in that an initial application for VAT registration was
     made showing an incorrect date for the EDR.  Subsequently, a request was 
     made for this date to be changed to a later date, namely the date that 
     registration was required by legislation. In our case this date was actually 
     1 May 2007.

     Crucially, in both the Homeforce case and our case, it is considered that 
     HMRC treated requests to change the EDR to the date when the business
    was actually obliged to register under legislation as a request for an
    amendment to the EDR.”

[the bold underlined word “amendment” is in the original document]

Mr Bourgerie continued by pointing out that in both the Homeforce case and his company’s case, HMRC failed to consider that the requests to change the EDR should have actually been treated as a request to cancel registration and re-register for VAT at a later date. He stated that these points were crucial as there was no statutory provision for HMRC to amend an existing VAT registration.

43.   He added that HMRC, as a concession, can allow a retrospective change to the EDR to a later date if there has been a genuine error in completing the VAT 1 form. It was considered by the Appellant that by treating their request for a change in EDR as a request for an amendment to the EDR rather than a request for a cancellation of a VAT registration and re-registration at a later date, HMRC’s decision to refuse the Appellants’ request was flawed.

44.  An additional point was also made in respect of HMRC’s refusal to change the EDR based on their argument that there is no statutory provision for them to amend an existing VAT registration.  Mr Bougerie quoted HMRC guidance contained in (V Series - VAT Guidance V1-8 Volume 1, Registration) at section 8.7 where it is stated that the basis for this refusal is that “When the trader applied for a registration he had the opportunity to negotiate his EDR then and the legislation does not allow this date to be changed retrospectively.”

The Appellant argued that it did not have the opportunity to negotiate its EDR as the HMRC online VAT registration facility did not allow the company to enter the date of registration it required.

45.  Mr Bougerie quoted again from the same HMRC Guidance at section 8.7 whereby HMRC can allow a retrospective change to the EDR to a later date if there has been a genuine error in completing the VAT 1 form.

46.  Therefore, it was submitted that by treating the Appellant’s request for a cancellation of VAT registration and re-registration at a later date, HMRC’s decision to refuse that request was flawed.

47.   As a final point, Mr Bougerie stated that his company did not have the opportunity to negotiate its EDR as HMRC online registration facility did not allow the company through its book-keeper to enter the date of registration required.  He argued that if his company had completed the  VAT 1 manually, it would have entered the relevant registration date as being more than 3 months in the future.  The completion notes that accompany the manual VAT  form were silent on the issue of a future registration date. This would have given an opportunity for HMRC to raise a query when considering the application to register concerning the later registration date entered.

Reasons for decision

48.  There are three issues arising from this appeal for our determination which we will consider separately.

The initial application for registration.

49.  It is generally accepted as a fact that the Appellant, through its book-keeper, completed an ‘online’ electronic application form to register for VAT on 29 November 2006.  The Appellant stated that it made its first taxable supply on that date and it would like its registration to commence from          29 November 2006 as well.  Its estimated turnover for the following twelve months was given as £150,000.

50.   We find that the Appellant made an application to register for VAT on a voluntary basis under the provisions of paragraph 9 of Schedule 1 of VATA.  The Appellant has argued that it really wanted to be registered from a later date which has been stated to be either 1 April or 1 March 2009.  Mr Bougerie on behalf of the Appellant has now accepted the date as 1 March 2009 and therefore this is the date the tribunal accepts as being the one intended.

51.  The book-keeper, Mrs Anderson, endeavoured to insert 1 March 2007 in the electronic VAT  form on her computer but as the software in the HMRC programme only permitted a maximum of three months in advance for an EDR, the actual date of processing (20 November 2006) flashed up on the screen.  Although the Appellant’s Managing Director (Mr Bougerie) was in the same room as Mrs Anderson at the time and also another experienced businessman who had undertaken a similar process a year previously (when a wrong EDR had been inserted) Mrs Anderson decided to proceed and “struck the submit button.”

In our view, she should at that moment in time before pressing the default button consulted with Mr Bougerie and the businessman.  In doubt, they could have called the HMRC helpline to ascertain what to do.  They did not. Indeed, Mrs Anderson did not even take a copy of the application form which it would have been prudent to do so.

It is not incumbent on HMRC to enquire of every person whether the date inserted in the application form is correct.  Customs have only to comply with paragraph 9 of Schedule  of VATA. This provides for a person who is not liable to be registered to satisfy the Commissioners that he is making or about to make taxable supplies and if he so requests (which the Appellant did) to register him with effect from the day on which the request is made or from such earlier date as may be agreed.

52.  The Appellant contends that as it was unable to enter 1 March 2007 as the date of registration due to the limitation of a maximum of three months in the future in the online registration form, it was restricted in its ability to negotiate the required registration date which resulted in HMRC being unable to identify any inconsistency on the form VAT 1.

53.  We do not accept that argument.  We consider a forward period of three months is reasonable and in this case if the Appellant had waited just three days before submitting its application then the date of 1 March 20007 as the EDR would have been accepted online.

54.  Therefore, we find there was no official error in processing the application and also there was no evidence to show that the Appellant was liable to be registered from an earlier date than that applied for.

The request to change the EDR

55.   In the first half of January 2007 (the exact date was not revealed to the tribunal), the Appellant received an official acknowledgement from Customs that it was registered for VAT as from 29 November 2006.  Mr Bougerie contacted his Accountants, Tax Assist immediately and on or about 17 January 2007 the Accountants contacted HMRC on the telephone and explained that the wrong date had been inserted in the VAT 1 form and i should have been 1 March 2007.  They were requested to put this in writing which they did on 17 January 2007.

56.  It is quite clear to the tribunal that the Appellant did not want to be registered for VAT from 29 November 2006 as it was not making sufficient taxable supplies to warrant registration at that time.  Due to a misunderstanding with advice from its Accountants, the company registered when it started its business.  The Appellant wished to be registered as from      1 March 2007 when it anticipated exceeding £61,000 gross turnover.

57.  The letter from Tax Assist to the HMRC Variations Unit dated 17 January 2007 stated, “Following to our conversation over the phone, we have been advised to write the request to you to change the effective date as stated on the Certificate of Registration …”

The decision of HMRC

58.   This is contained in a letter dated 6 February 2007.  The Customs Officer, Mr Gareth Stephen assumed that the request was to “amend” the EDR. He pointed out that the only circumstance where Customs could vary he date of registration was if there had been a departmental error during the registration process or information had come to light indicting that the Appellant was liable to be registered from an earlier date.

59.  Mr Stephen was stating an internal implementation by the Commissioners of an unpublished policy since there is no statutory provision enabling there to be an amendment to an EDR.

60.  The average person “on the Clapham omnibus” would not be expected to know that the only way permitted by statute to change/amend an EDR to some future date was to apply for the original registration to be cancelled and re-registration with the future date to take place.  Paragraph 3(1) of Schedule 1 to VATA provides for the process of cancellation of a registration and paragraph 1(1) of the same Schedule deals with the liability of a trader to register.

61.  In our opinion, upon receipt of the letter of 17 January 2007 following the Accountant’s telephone conversation, HMRC should have explained to the Appellant the situation as set out in paragraph 60 above.  We agree entirely with the comments in the Homeforce decision at paragraph 75 as follows :

   “75. The “prior decision” was flawed in our judgment because the Commissioners’ obligation to act reasonably precluded them from unilaterally treating an appal against registration as a request for amendment of an effective date of registration, without taking steps to ensure that the appellant (or his representative) understood the difference between the two.  The difference is material in that on an appeal against a refusal to amend an effective date of registration, a tribunal can only direct a further review.  Furthermore the issue on an appeal against  refusal to amend an effective date of registration is concerned with the internal implementation by the Commissioners of an unpublished policy, and to that extent it is inevitable that the dissatisfied trader is fighting, at least to some extent, in the dark. The “prior decision” gave rise to an unjustified inequality of arms between the parties and was for that reason flawed. ”

62.  Accordingly, we find that the decision of Mr Stephen in his letter of          6 February 2007 is flawed in that it did not take into account that effectively the Appellant was endeavouring to cancel the original registration and re-register with an EDR of  1 March.

Conclusion

63.  We therefore direct that the request from the Appellant to appeal against registration from 29 November 2006 and request registration from 1 March 2007 shall be reviewed by an officer or officers without any previous involvement with this appeal and in the light of our decision.

64.   Although, as in Homeforce we cannot direct, we state that we consider that the further review should approach the request as a request for the cancellation of the registration as from 17 January 2007 and for re-registration from 1 March 2007.  The result would be that the Appellant would be allotted a new Registration Number and they would make a voluntary declaration to account for the VAT for which they were accountable under the old VAT Registration Number.  Any VAT paid by the Appellant for the period            17 January 2007 to 1 March 2007 in our view would in principle be refundable to it.

65.  As the appeal is partially allowed, there is no order as to costs.

66.   On 1 April 2009 The Tribunal Procedure (First-Tier Tribunal) (Tax Chamber) Rules 2009 – 2009 No. 273 (L.1.) came into force.  A new appeal procedure to the Upper Tribunal was introduced in Part 4 under Rules 40, 41 and 42.  These rules superseded the previous procedure for appealing to the High Court under section 11 of the Tribunals and Inquiries Act, 1992.  The previous procedure therefore no longer exists.

67.   In accordance with the Ministerial Statement of 10 March 2009 and paragraph 7(3)(a) of Schedule 3 to the Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (“the Transfer Order”) the First-Tier Tribunal (Tax Chamber) retain the discretion to apply the procedural rules of the former VAT and Duties Tribunal under the VAT Tribunals Rules 1986 as amended (SI 1986/590).  Paragraph 7.2 of Schedule 3 of the Transfer Order states that where a hearing before an existing tribunal began before the commencement date of the new rule but was not completed by that date, the tribunal must be comprised for the continuations of that hearing of the persons who began it.  That is the case here.

68.   In the circumstances, and bearing in mind that both parties’ pleadings were submitted well before 1 April 2009 and the matter proceeded to a full hearing of the appeal on two occasions but was adjourned on both occasions, being part-heard twice prior to the implementation of the new rules, this tribunal directs that the VAT Tribunals Rules 1986 as amended shall continue to apply to this appeal.

69.  However, as the right of appeal to the High Court no longer exists, this tribunal further directs that Rules 40, 41 and 42 of SI 2009 No. 273 (L.1.) shall also apply to this appeal.

Rodney P Huggins
Chairman
Released : 8 October 2009

LON/2007/0632