19047
	 VAT — REGISTRATION — appellant voluntarily registered with effect from agreed date prior to application for registration — appellant seeking retrospective alteration of date of registration to a different date whilst maintaining registration — alteration not catered for by VATA 1994 — appellant’s adviser claiming that he was misled by Customs in advice given over VAT help-line — no evidence to that effect — alleged misleading advice irrelevant in any event — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

 
 	
	INWARD TREASURE (UK) LIMITED	Appellant

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	Michael Johnson (Chairman)
						Susan Stott FCA ATII	

Sitting in public in York on 7 April 2005

The Appellant was not represented

Lisa Linklater, counsel, instructed by the Solicitor’s office of HM Customs and Excise for the Respondents 

	© CROWN COPYRIGHT 2005

DECISION

1.	This appeal concerns the voluntary registration of the Appellant for value added tax.

2.	When the appeal was called on for hearing, it was apparent that no-one had attended to represent the Appellant.  However, having had the opportunity of considering a folder of relevant documents produced to the tribunal, and the respective positions of the parties being apparent from the documents, we decided to proceed to hear the appeal, as we are empowered to do pursuant to rule 26(2) of the Value Added Tax Tribunals Rules 1986 (as amended) (“the rules”).

3.	Pursuant to rule 21(5) of the rules, we admitted into evidence two witness statements served on behalf of the Commissioners of Customs and Excise (“Customs”), namely:

•	That of Mr Geoffrey Stephen Clough, a review officer of Customs, dated 19 January 2005; and

•	That of Mr Geoffrey Torry Brown, a VAT audit officer of Customs, dated 27 January 2005.

4.	Mr Brown was in addition present in person at the hearing and was able to amplify the contents of his witness statement in answer to questions we asked.

5.	The following is the background to this appeal.

6.	The Appellant carries on business providing Chinese herbal care from shop premises in the High Street, Grantham, Lincolnshire.  It retails proprietary medicaments and herbal remedies which can be made up as beverages, and it offers the services of experts in areas of so-called “alternative” medicine such as acupuncture.  

7.	For VAT purposes the Appellant accordingly makes a range of supplies some of which are classified as standard-rated and some zero-rated.

8.	On 11 August 2003 the Appellant made a voluntary application for registration for VAT.  Certain relevant boxes in Form VAT 1 were not completed, so the Appellant made a second voluntary application in Form VAT 1, also dated 11 August 2003.

9.	We find that the second voluntary application was the one that took effect.  It did so by agreement with Customs.  This can be seen from the following considerations. 

10.	In the first Form VAT 1, no date was inserted in box 22, “I would like to be registered from … ”.  In the second Form VAT 1, box 22 was completed with the date 18 January 2003.

11.	Paragraph 9 of Schedule 1 of the Value Added Tax Act 1994 (“the Act”) provides, as slightly paraphrased, that where a person not liable to be registered under the Act and not already registered for VAT – which was the Appellant’s position – satisfies Customs that he, she or it makes taxable supplies, or is carrying on business and intends to make such supplies in the course or furtherance of that business, Customs shall if requested register the applicant for registration –

•	With effect from the day on which the request is made; or

•	With effect from such earlier date as may be agreed between Customs and the applicant.

12.	It is clear that the Appellant was not asking to be registered as from the date of application – 11 August 2003 – but rather from an earlier date than that, namely 18 January 2003.  It is also clear that Customs registered the Appellant for VAT because of and according to the second Form VAT 1.  It follows that registration with effect from 18 January 2003 must have been done as a matter of agreement between Customs and the Appellant, having regard to the terms of paragraph 9 of Schedule 1 of the Act.

13.	No difficulty with regard to the Appellant’s registration appears to have arisen until 23 December 2003, when its first value added tax return was submitted, covering its accounting period ending 30 November 2003.  The tax return was a repayment return, and it showed no VAT due at all in respect of outputs.

14.	Customs in accordance with routine practice decided to make a visit to the Appellant’s premises to check the contents of the return.  On 16 January 2004, Mr Brown of Customs met and talked to Mrs Carter, one of the directors of the Appellant’s business.

15.	It quickly became apparent that, although some of the Appellant’s supplies were properly classified as zero-rated, other supplies should be standard-rated for VAT.  

16.	Mrs Carter referred Mr Brown to the Appellant’s accountants, Express Accounts, of Rugby, Warwickshire.  During March 2004, Mr Brown exchanged “faxes” with Mr David Winkle of that firm, in an attempt to agree the correct value of the standard-rated and zero-rated supplies made by the Appellant for the accounting period in question.  He also discussed the position with Mr Winkle over the telephone.

17.	In a “fax” to Mr Brown dated 18 March 2004, Mr Winkle mentioned that his client might issue an appeal.  He stated:  “N.B.  I think this appeal will be successful as we registered [the Appellant] based on advice received from VAT Enquiries Help-line”.

18.	This was the first that Mr Brown had heard that the Appellant might contend that it had been misled by Customs.  In particular, nothing had been mentioned to Mr Brown by Mrs Carter about that.  

19.	On 30 March 2004, Mr Winkle wrote to Customs alleging that the voluntary registration of the Appellant for VAT had taken place, as from the commencement of the Appellant’s trading in January 2003, because of advice received over Customs’ VAT help-line that the supplies made by the Appellant would be zero-rated.  The letter stated:

	“ … we [ie Express Accounts] were informed that our client’s [ie the Appellant’s] income would be zero-rated.  We explained that our client’s income was a mixture of acupuncture services which we were told would come under medical services, and herbal remedies which we were informed would qualify as prepared medicine”.  

20.	It therefore appears that the advice was allegedly given to Express Accounts, not the Appellant directly.

21.	Customs asked one of their review officers, namely Mr Clough, to investigate the advice said to have been given.  Mr Clough could find no record of an enquiry ever having been made about the Appellant.  This is perhaps not surprising, as Mr Winkle was apparently not able to give Mr Clough, when requested, the name of the person at Customs he had spoken to for advice.

22.	This tribunal is accordingly without evidence that Customs gave any advice of the kind alleged by Mr Winkle, or that an enquiry was made as alleged.

23.	On 31 March 2004, Mr Brown wrote to the Appellant setting out the figures which Customs had calculated should have been included in the tax return lodged in December 2003.  Those calculations showed net tax amounting to £5,084.83 due from the Appellant.  The letter stated that that amount was thereby assessed as tax due.

24.	On 11 June 2004, Mr Winkle wrote requesting that the Appellant’s effective date of registration should be amended from 18 January 2003 to a later date, on the ground that the Appellant had been given incorrect information by Customs.  

25.	Mr Clough replied to that letter on 26 July 2004, stating that he could find no evidence in support of the allegation of misdirection, nor that the voluntary registration was processed incorrectly, so he confirmed 18 January 2003 as the correct registration date.   

26.	The appeal in this case was lodged by Mr Winkle on the Appellant’s behalf.  It was received by the Tribunal Centre on 1 September 2004.  The stated grounds of appeal are as follows:

“I wish to appeal on the following grounds:  Early voluntary registration was requested on the basis of information received from VAT help-line.  This information proved to be false and resulted in additional VAT being due”.

27.	Miss Linklater, appearing for Customs in this appeal, submitted that Schedule 1 of the Act does not provide for retrospective alteration of the date of registration of a taxpayer who continues to be registered for VAT.   Paragraph 13 of that Schedule provides for the cancellation of registration, but only as from the date of the application for cancellation.  The only exception to this, she submitted, was where the registered person was not registrable – ie should not properly have been registered in the first place (for example, because the applicant for registration was not making taxable supplies).

28.	She submitted that there was no evidence that the Appellant or its accountants had been misled by Customs as alleged.  She further submitted that even if there were such evidence, and even if the tribunal were persuaded that the Appellant or its accountants had indeed been misled, the machinery for altering the date of registration as sought by the Appellant was altogether lacking.  Any such alleged misleading was accordingly irrelevant to the outcome of the appeal.

29.	We think that Miss Linklater is right.  

30.	In the first place, the Act is indeed silent as to the possibility of substituting a later date of registration for the original date of registration, whilst maintaining the registration.  We think that this is intentional.  The reason is that to allow such a retrospective adjustment of the registration date would necessitate a revisiting of all relevant transactions in the interim period.  One would be left with a situation where all those persons who have received supplies from the registered person during that period would be entitled to a refund of any VAT paid.  In the typical case of a shopkeeper, it would be impossible to trace many of the customers.  

31.	Similarly, as paragraph 13 of Schedule 1 of the Act makes clear, retrospective cancellation of registration is not possible unless the registered person was not registrable when first registered.  “Registrable” is defined by paragraph 18 of Schedule 1 as meaning liable or entitled to be registered under that Schedule.

32.	In the second place, as mentioned above, this tribunal has no evidence whatever that Customs gave advice as alleged.  Indeed, it would not matter if the tribunal did have such evidence.  The Act would still not permit retrospective alteration of the registration date. 

33.	By way of an aside, it seems to us that any accountant or other professional person who undertakes work for clients in the field of VAT must make himself an expert and not place reliance upon the Customs VAT help-line to the exclusion of such expertise.  It is one situation if a layman resorts to the help-line to obviate the cost of professional advice, and another matter entirely if a professional person, retained for a fee, purports to rely upon the help-line as an excuse for neglecting his research.  There is, we feel, a suggestion that that is what happened in this case.

34.	This appeal is accordingly dismissed.  We announced the outcome of the appeal at the conclusion of the hearing, so Miss Linklater applied for costs.  

35.	We think that this appeal was doomed to failure and that costs must follow the event.  Miss Linklater asked us to quantify costs in the amount of £770.00.  By analogy with the Civil Procedure Rules 1998, as that figure approximates to what might properly have been recoverable in respect of a “fast track” trial, allowing for counsel’s brief fee and a sum towards Customs’ departmental costs, that figure appears fair and reasonable.  We therefore direct that the Appellant is to pay Customs their costs of the appeal, summarily assessed in that amount.

MICHAEL JOHNSON
CHAIRMAN
Release Date: 13 April 2005

MAN/04/0488