Case Report: Savagar [2014] TC 03306

[2014] UKFTT 168 (TC)

Judge John Brooks, Christopher Jenkins

Decision released 5 February 2014

Value added tax — Exception from registration –Whether HMRC satisfied that the value of appellant’s supplies in following year would not exceed deregistration threshold – Whether HMRC’s refusal to apply the exception was reasonable and, if not, whether decision would have inevitably been the same – Appeal dismissed — Value Added Tax Act 1994 (‘VATA 1994’), Sch. 1, para. 1(3).

  The First-tier Tribunal (‘FTT’) dismissed the taxpayer’s appeal against HMRC’s refusal to apply the exception from registration in VATA 1994, Sch. 1, para. 1(3).

Summary

  Savagar is a builder and a sole trader. In October 2011, the turnover of his business exceeded the then registration threshold of £73,000. As a result, he was required to be registered for VAT from 1 December 2011. However, at the time Savagar did not realise this. His accountants wrote to HMRC on 8 January 2013 to advise them and to claim that breaching the threshold was exceptional. However, HMRC declined to except him from registration.

  The FTT held that in cases of late registration, as well as in cases where the trader notifies HMRC in due time, HMRC must give effect to para. 1(3) by considering the case as at the date from which registration would otherwise take effect and, by looking forward, asking whether they are satisfied that turnover will not exceed the threshold amount. HMRC do this on the basis of what they consider to be likely from the perspective of the evidence that would have been available at the date of registration.

  The FTT held that, if HMRC had properly considered the evidence available at the relevant date, it would have been possible for them to be satisfied that Savagar’s future turnover would not exceed the threshold (para. 34 of the decision).

Comment

  This case illustrates the practical problems with VAT registration when the business does not understand the detailed law and the adviser sees the figures belatedly when preparing the annual accounts says specialist small business accountant Brooke Purcell at Harris & Co accountants Northampton, the specialist small business accountants.