Calculation issue

Reasonable excuse for not registering for VAT

The taxpayers’ business traded as a café with standard and zero-rated sales. It did not register for VAT despite trading above the threshold from 1 April 2009 to 31 March 2013.

In December 2014 HMRC registered the business with effect from 1 April 2009 and raised an assessment to collect the VAT plus a penalty.

The taxpayers appealed. They blamed their accountant for telling them that zero-rated sales were not included in the VAT threshold. They accepted that the outstanding VAT was due but said the penalty was unfair because they had not acted deliberately or tried to evade VAT.

The First-tier Tribunal agreed that the taxpayers should be registered from 1 April 2009. They did not have reasonable excuse for not registering because ‘ignorance of the law and reliance upon another for advice’ was no basis for this. However ...