Phillips v Revenue & Customs [2006] UKVAT V19519 (04 April 2006)

19519

VALUE ADDED TAX — flat rate schemes — discount of one per cent allowed in first year of registration — Appellant contending that he was advised to use flat rate scheme and take the discount even though he had already been registered for a year — assessment for under-paid tax — Appellant accepting that not entitled to discount but complaining of misdirection — matter not within tribunal’s jurisdiction — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

IAN PHILLIPS 
Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

			Tribunal:	Colin Bishopp (Chairman)

Sitting in public in Manchester on 30 January 2006

The Appellant did not appear and was not represented

Bernard Haley of the office of the Acting Solicitor for HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2006

DECISION

1.	The Appellant, Ian Phillips, carries on a parcel delivery service. He has been registered for VAT since 1 March 2001. On 20 July 2004 he applied to join the flat-rate scheme  for which provision is made by section 26B of the Value Added Tax Act 1994 and Part VIIA of the VAT Regulations 1995 (SI 1995/2518). His application was accepted on 30 July, with retrospective effect to 1 May 2004.
2.	Regulation 55JB of the 1995 Regulations provides that, for a period which begins on his joining the scheme within one year of his effective date of registration and which ends on the first anniversary of that date, a trader within the scheme is allowed to use a rate which is one percentage point lower than the normal rate prescribed for his category of trade. In Mr Phillips’ case, the normal rate was nine per cent and the reduced rate, were it available, would consequently have been eight per cent.
3.	However, as the chronology above shows, Mr Phillips could not use the reduced rate at all since the date on which he joined the scheme, 1 May 2004, was more than one year later than his effective date of registration, 1 March 2001. Nevertheless, believing he was entitled to the reduction, Mr Phillips took advantage of it and began to account for tax at the rate of eight per cent of his turnover from 1 May 2004. The fact that he had done so was discovered at a routine visit on 10 February 2005, following which the Respondents made an assessment for the difference between the amount for which Mr Phillips should have accounted and the amount which he had declared. The assessment, against which Mr Phillips has appealed, was for £599.
4.	Mr Phillips did not attend the hearing and, at the request of Bernard Haley of their solicitor’s office, who appeared for the Respondents, I agreed to hear it in Mr Phillips’ absence in accordance with rule 26(2) of the Value Added Tax Tribunals Rules 1986 (SI 1986/590); Mr Phillips may apply to have this decision set aside, within 14 days of its release, if he is aggrieved by it. 
5.	As Mr Phillips did not attend the hearing, I have only the grounds recorded in his notice of appeal as a statement of his case. There, he contends that it was the Commissioners who approached him, invited him to join the scheme, and told him that he would have the benefit of the reduction for a year. He goes on to say that he discovered that the reduction was not available to him only on the occasion of the visit in February 2005, and repeats his contention that he was misled by the Commissioners. Mr Haley told me that Mr Phillips had been asked to be more precise about the advice which he says he was given, but that he had not, at least so far, been able to do so.
6.	Unfortunately for Mr Phillips, this tribunal has no power to deal with complaints of misdirection; it can only determine the correct amount of tax due. As Mr Phillips appears to accept, he was not entitled to the reduction, as a matter of law, and he must account for the under-declared tax, the amount of which he does not seem to dispute. If he wishes to take the matter further, he should do so with his local VAT office and, if that does not lead to an acceptable result, complain to the Revenue Adjudicator. He has, however, no remedy before this tribunal, and I must dismiss his appeal.

COLIN BISHOPP
CHAIRMAN
Release date: 4 April 2006

MAN/05/0729