Registration confusion

The taxpayer had two different trading activities: an electrical retail business and a restaurant. Neither traded above the VAT registration threshold individually but the combined turnover exceeded the threshold for a period in 2006.

HMRC considered both to be sole trader activities of taxpayer which created a retrospective liability to register for VAT from 1 September 2006. The department also issued a 15% late-registration penalty.

The taxpayer claimed the restaurant was run in a partnership with an individual who gave financial support when the business ran into problems – but the First-tier Tribunal concluded this was a loan arrangement rather than a partnership.

The taxpayer’s appeal was dismissed.

However the tribunal said it believed the taxpayer’s failure to register had ‘been occasioned by honest misunderstandings’ adding it hoped HMRC would ‘as understanding as possible in...