Retrospective Entry to the Flat Rate Scheme (FRS)
HMRC refused Anycom Limited retrospective entry to the FRS with effect from 1 April 2005. Anycom appealed Anycom Limited v Revenue & Customs  UKFTT 654(TC).
The First-tier Tribunal's jurisdiction (FTT) in cases against the FRS is one of review only, they cannot substitute their own decision for that of HMRC. The FTT considered whether HMRC properly reviewed the exceptional circumstances.
On 23 July 2009 Anycom's accountant wrote to HMRC requesting Anycom be allowed to enter the FRS with effect from 1 October 2004, subsequently amended to 1 April 2005.
Application for retrospective entry to the FRS was made owing to Anycom's unblemished VAT compliance record, the potential saving of VAT was £17,735.29 and Anycom had at all times in the relevant period been eligible for the FRS.
In the FTT's view, the fact that there had been an overpayment of tax under the normal regime was not sufficient reason or exceptional circumstance to authorise retrospective use of the FRS.
Anycom did not advance any exceptional circumstances or consequences that the overpayment may have caused the business. Had they done so, the results might have been different.
VAT appeal out of time
When a decision has been made or an assessment raised by HMRC there are very strict time limits in which an appeal to the FTT, a request for a review or an extension of time to appeal can be made.
The powers of the Tribunal to extend the time to appeal are contained in Rules 5(3)(a) and 20(4) of the Tribunal procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.
Scan Corporation Limited TC 01497 requested an extension of time in which to appeal to the FTT. The company appealed assessments raised by HMRC against Scan's claims for input tax relating to refurbishment costs of a restaurant. Scan did not operate the restaurant nor did it make any charges to the operator for its use.
The FTT accepted HMRC's contention that even had an extension of time been accepted, the case had no reasonable prospect of succeeding.
The FTT commented; "If the Applicant had a good prospect of success, given the complexity of the case it might have been appropriate to extend time even given the delay."
The FTT are willing to consider appellants' extensions of time even outside of normal limits where cases are complex and there is a reasonable chance of success or a point to be considered.
Missing a deadline to appeal to the FTT or request an extension of time to appeal may not, therefore, be the end of the road. (See Radford Racing Limited for further comments)
VAT on imports and onward supply relief (OSR)
Hot on the heels of the Scan Corporation Limited case already detailed, Radford Racing Limited TC 01500, applied to the FTT out of time and neither HMRC nor the FTT objected to the Radford appeal.
Radford imported cars and supplied them to other VAT registered businesses in the EU outside the UK. It claimed relief from import VAT under OSR. One of the conditions of OSR is the completion of EC Sales lists.
Radford had not completed EC Sales lists. Radford was not therefore entitled to OSR. The business was liable to pay £19,900.01 VAT claimed under OSR.
This case highlights the importance of getting procedures right.
HMRC provide input tax toolkit
On 3 November HMRC issued the HMRC compliance toolkit entitled "HMRC Toolkit: VAT Input Tax" effective for agents from 1 June 2011.
The toolkit reviews the following:
- Reclaiming VAT on purchases made before registration or after deregistration;
- Flat Rate Scheme;
- Areas of risk within VAT input tax;
- Checklist for VAT input tax; and
- Explanation and mitigation of risks
The areas of risk section is surely the toolkit for every HMRC officer on a VAT inspection!
The toolkit provides checklists and mitigating factors to be taken into account and is on the HMRC website.