[2011] UKFTT 693 (TC)
TC01535
Appeal number: TC/2011/01579
VAT –
deregistration – fall in Appellant’s sales to below registration threshold –
Application to deregister – power of the Commissioners to deregister
retrospectively – appeal dismissed.
FIRST-TIER TRIBUNAL
TAX
ILKLEY
DRESS AGENCY Appellant
-
and -
THE
COMMISSIONERS FOR HER MAJESTY’S
REVENUE
AND CUSTOMS Respondents
TRIBUNAL:
LADY MITTING (JUDGE)
DEREK
ROBERTSON (MEMBER)
Sitting in public in Manchester on Monday 10 October 2011
The Appellant did not appear
and was not represented
Pat Roberts of HM Revenue and
Customs, for the Respondents
© CROWN COPYRIGHT
2011
DECISION
1. Ms
Caroline James is a sole proprietor trading as the Ilkley Dress Agency. She
appeals against a decision of the Commissioners by which they refused to
deregister her retrospectively and consequently also refused to refund the VAT
accounted for during the period of registration.
2. The
Appellant did not attend the hearing, having written in to explain that she
would not be doing so and asking that the tribunal should consider the case on
the paperwork which we agreed to do.
3. Ms James
carries on the business of selling designer second hand clothing and
accessories. Ms James took over the business as a going concern on 1 October
2006 and she continued to submit and pay on quarterly returns thereafter. By
application dated 2 November 2010, Ms James applied to deregister, following
fallen turnover, the application being received by the Commissioners on 3
November. In the application to deregister, Ms James asked for the
deregistration to be backdated to 1 September 2010, explaining that the
business could in fact have deregistered at the end of 2008. In a further
letter, Ms James explained that the overpayment was a result of the fact that
her VAT liability was declared quarterly throughout the year so that her annual
turnover was not confirmed until the end of her financial year at which time it
would be picked up by her accountant. It was only at that point, Ms James
explained, that her continuing liability to be registered could be established.
4. The
Commissioners advised Ms James that the effective cancellation date would be 3
November 2010 on the basis that her turnover had reduced but that it was not
possible for her to be deregistered retrospectively.
5. Further
correspondence and communication ensued between Ms James and the Commissioners
but by letter dated 1 February 2011, the Commissioners upheld the decision to
refuse to backdate the deregistration on the basis that there was no statutory
provision enabling them to do so.
6. Ms James
appealed to the tribunal by application dated 23 February 2011 giving the
following grounds of appeal:
“I am a self employed Ladies
Retailer, taking over the business in October 2006. The previous owner had been
registered for VAT so automatically I registered.
Your records will confirm
that the completion of my VAT returns along with payment has always been
completed and input promptly. The direct debit payment always been paid
directly without delay. I have always dealt with the VAT returns myself.
The payment has, I believe,
made in good faith as my books are only submitted to my accountant at the end
of my financial year which is the end of September. At this stage my turnover
is calculated for the year.
It was then that it was
noticed that my turnover figure had reduced under the threshold required for
VAT payment.
In retail, especially in the
current climate, it is impossible to forecast the annual turnover until the end
of your financial year. But at this stage my quarterly VAT returns have
already been submitted and payment made. The turnover figures produced by my
accountant confirm that my turnover for my financial year ending 30 September
2010 are net - £48,316, gross - £56,316.
When a retailer is clearly
under the current threshold, and returns along with the payments have been
submitted and paid, any overpayment should be allowed to be refunded as these
payments are made in advance of the year end figures.
The amount already overpaid
in VAT is £6,637.87.
I retail second hand Ladies
Clothes and Accessories, and have been paying VAT on my 50% commission on the
sale of these goods.
VAT has not been charged to
any of my customers when they have purchased any item from my business. I can
also confirm that the VAT number is not shown on any documentation issued to
the customer. The amount the customer pays for any item is the ticket price on
the goods of which I receive 50% commission. VAT is not calculated in any of
the prices on the goods.
I then have paid VAT on my
commission, as per terms for ‘Sale of Second Hand Goods’.
Input of my last VAT return
(September and October) is still outstanding pending the outcome of this
enquiry.
I am asking you to look at my
request to backdate my deregistration application to cover my previous
financial year when clearly my turnover was below the threshold limit. The
date requested is October 2009.”
7. The
relevant law is to be found in Schedule 1 paragraph 13 of the VAT Act 1994
which at paragraph 13(1) states as follows.
“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. “
8. Given that
Ms James did not attend the hearing, we considered with great care both the
grounds set out in her Notice of Appeal and also the representations which had
been made throughout the correspondence between the parties. We understand
that Ms James prepared her own VAT returns on a quarterly basis, instructing
her accountant only annually to prepare her annual accounts.
9. We have
analysed with some care, the quarterly figures which Ms James returned from
November 2006 to August 2010 and, as she indicated in her application, she
should have been deregistered at a considerably earlier stage and it is most
unfortunate that this was not noticed at the relevant time. We have every
sympathy with her but unfortunately the law is quite clear. The Commissioners
have no power to make a retrospective deregistration. The obligation upon the
Commissioners is that where they are satisfied that someone is not liable to be
registered then they shall cancel his/her registration but only with effect
from the day on which the request is made or from such later date as may be
agreed between them. Consequently, the cancellation of the registration cannot
take effect any earlier than the date upon which it did. It follows,
unfortunately for Ms James, that there can be no obligation upon the
Commissioners to repay any VAT which was paid over to them during the period of
registration. The appeal has therefore has to be dismissed.
10. 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.
TRIBUNAL JUDGE
RELEASE DATE: 26 October 2011
