Wrong decision

Entitlement to backdate deregistration

The taxpayer took over a café and applied to register for VAT on a voluntary basis from 1 November 2011. However the directors thought that no VAT was payable or chargeable on sales until trading exceeded the annual VAT registration threshold. So they did not submit VAT returns until they had received default surcharges and central assessments from HMRC.

The business deregistered on 12 August 2014. A year later the taxpayer’s advisers asked for the deregistration to be backdated to November 2011 on the basis that the taxpayer should not have registered in the first place.

HMRC refused the request relying on VATA 1994 Sch 1 para 13(1).

The First-tier Tribunal noted that HMRC accepted the taxpayer was not liable to be registered but that it was ‘entitled to be registered’ (Sch 1 para 18) on a voluntary basis and had...