Reasonable choice

The taxpayer was a one-person company. It applied for VAT registration with effect from June 2011 describing the business as design engineering services in relation to the assembly and manufacture of pressure-containing subsea equipment.

The firm applied for the VAT flat rate scheme on the advice of its accountant. The most suitable category appeared to be “manufacturing fabricated metal products” because it included general mechanical engineering but the company did not make anything so it opted for “any other activity not listed elsewhere”.

HMRC said the taxpayer should be in the sector for architects civil and structural engineers and had been unreasonable to select “any other”.

The company appealed.

The First-tier Tribunal held the taxpayer has been “diligent and reasonable” in its choice of category since the nature of its business was not listed. The firm was entirely unrelated to that of an architect or...