Administrative advantage

The taxpayer company registered for VAT and joined the flat-rate scheme (FRS) from 1 June 2007.

An HMRC inspection in 2011 found errors in the firm's VAT returns including calculation of the liability based on net as opposed to gross turnover. As a result the taxman raised an assessment for an additional £4 958.

The company sought to withdraw from the FRS retrospectively claiming to not understand the workings of the scheme. The request was refused and confirmed by an internal Revenue review.

Under VAT Regulations 1995 reg 55 traders may opt to withdraw from the FRS and withdrawal can be retrospective with HMRC agreement.

The First-tier Tribunal heard that withdrawals are backdated only ‘exceptionally’ and in the taxman’s view no exceptional reasons applied in this case.

The tribunal expressed ‘a measure of sympathy’ but stated it was the taxpayer's responsibility...