19838

VAT – REGISTRATION  -  agreed date for voluntary registration  -  barrister specifying date of commencement of practice as date for registration  -  failure to appreciate need to account for VAT on all taxable supplies from that date  -  no basis on which tribunal can reopen agreement as to date of registration  -  appeal to vary date of  registration on grounds of innocent mistake dismissed 

LONDON TRIBUNAL CENTRE

	LOUISE HOWARD	           Appellant

-	and –

	THE COMMISSIONERS FOR HER MAJESTY’S REVENUE & CUSTOMS 	 Respondents

				Tribunal:	MICHAEL JOHNSON (Chairman)
						CHRISTOPHER PERRY

Sitting in public in Plymouth on 12 October 2006

Lee Curtis, ACA of Bromhead & Co, chartered accountants for the Appellant 

Simon Chambers, counsel instructed by the Solicitor for H M Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2006

DECISION

1.	This appeal concerns the date from which the Appellant should be treated as registered for VAT.  She has been registered for VAT with effect from 9 May 2005.  The issue is as to whether the Appellant is bound by that date or can still elect to be registered with effect from some later date by reason of her innocent mistake.

2.	The Appellant gave oral evidence explaining to the tribunal the circumstances of her registration.  From what she had to say and from the bundle of relevant documents provided to the tribunal, we find the following facts. 

3.	The Appellant is a barrister who practises from chambers in Plymouth.  She started practice on 9 May 2005.  Whilst not anticipating that the level of her earnings would exceed the VAT threshold in early course, she nevertheless decided to make a voluntary application to be registered for VAT.

4.	The Appellant sent a signed Form VAT 1 to H M Revenue and Customs (“HMRC”) on or about 10 August 2005.  She ticked the boxes in the form to the effect that her turnover was and was likely to remain in the immediate future beneath the VAT threshold.  She also ticked the box asking to be registered from a date earlier than the date on which the law would oblige her to register.  However she left blank the box asking her to specify the date from which she would like to be registered, and instead put: “As soon as number available”.

5.	In relation to the use of that phrase, the Appellant told the tribunal that she had not been charging VAT on her fees so far. She said that her intention was to start charging VAT on her fees once her registration had been effected and not before.  She did not know exactly when that would be, so she put “As soon as number available”.  

6.	On 5 September 2005, HMRC sent the Appellant a Request for Information, asking firstly the nature of her taxable supplies, secondly when she began making them, and thirdly for confirmation of the date from which she wished to be registered.  This third request was stated to be “just to clarify”.

7.	Unfortunately the Appellant did not immediately reply to the Request for Information, so HMRC sent her an Advice of Non-registration dated 27 September 2005.  

8.	On or about 10 October 2005 the Appellant sent back the Request for Information with the reply boxes completed.  Consequently her file was re-opened and actioned by an officer of HMRC called Tracy Caddy.

9.	On page 1 of the Request for Information, the Appellant replied as follows to the question as to the nature of her taxable supplies:

“I am a self-employed barrister.  I represent lay people in court (criminal and civil proceedings)”.

10.	To the question as to when she began making taxable supplies, she replied:

“I made my first taxable supply on 9 May 2005”.

11.	On page 2 of the Request for Information, to the enquiry asking for confirmation of the date on which she wished to be registered, she replied:

“9 May 2005 if possible – if not, as soon as possible please”.

12.	On the face of it, therefore, the Appellant had expressed a preference to be registered as from 9 May 2005.   

13.	Tracy Caddy took the information provided and unilaterally amended the Form VAT 1 submitted by the Appellant in August 2005, by inserting “09/05/2005” in the box left blank next to where the Appellant had written, “As soon as number available”.  Tracy Caddy also amended the Form VAT 1 to show the description of the Appellant as “barrister” (the Appellant had put “legal advice” as being the nature of her business activities) and inserted “09/05/2005” in the box to indicate the date of the first taxable supply (the Appellant had left that box blank).       

14.	These amendments were not agreed with the Appellant before they were made.  However, at the foot of both pages of the Request for Information form, immediately above the Appellant’s signature, the form stated:

“I request that the information on this form be considered part of my original notification on Form VAT 1.”  

15.	As the Appellant signed her name immediately after each of those statements, before returning the Request for Information form, the return of the form amounted, in our view, to an invitation to HMRC to read the Form VAT 1 as amplified by the additional information she was providing.   In our view, therefore, the amendments were properly made.  

16.	The upshot was that without further communication between the parties HMRC proceeded to register the Appellant for VAT with effect from 9 May 2005.  This must have been on the basis that the amendments made to the Form VAT 1 had resulted in the Appellant’s proposal as to 9 May 2005 for her date of registration being agreeable to HMRC. 

17.	The statutory basis for voluntary registration for VAT appears, so far as concerns supplies made within the UK, from paragraph 9 of Schedule 1 of the Value Added Tax Act 1994 (“VATA”).   According to that paragraph, where the Commissioners for HMRC are satisfied that a person is making taxable supplies –

“ … they shall, if he so requests, register him with effect from the day on which the request is made or from such earlier date as may be agreed between them and him”.

18.	The only alternative dates for registration are therefore (1) the date of the request to register; or (2) an agreed earlier date.  If there is no agreed earlier date, the date for registration is provided to be the date of the request for registration.

19.	We find that HMRC took 9 May 2005 as the agreed date for registration in this case.  The alternative date would have been on or about 10 August 2005, when the Form VAT 1 was sent in.  

20.	The Appellant’s original statement in Form VAT 1, that she would like to be registered “as soon as number available”, does not appear to us to relate specifically to either of the alternatives mentioned in paragraph 18 above.  The Form VAT 1 would, we think, fall to be construed as a request for registration as of the date of the form, had the form not been amplified following the return of the Request for Information.  However, in our view, HMRC were right to ask for clarification of the preferred date for registration, because until the Appellant returned her replies to the Request for Information, the position was vague.

21.	As we see it, the position was no longer vague once the Appellant had sent in her replies.  HMRC were entitled to take at face value the Appellant’s specific request to be registered as from 9 May 2005, and to give effect to the registration as from that date.

22.	The Appellant was frank in telling the tribunal that she did not appreciate, in August or October 2005, that the effect of registration from 9 May 2005 would be that she would be liable to account for VAT on all her fees charged from then onwards.  She had mistakenly assumed that that would not be the case.  The mistake was, as we find, an innocent one.  Although the Appellant is a practising barrister, the Appellant is not familiar with VAT and it is not an area in which she would presume to act without advice.  She told the tribunal that, before completing and returning the Request for Information in October 2005, she telephoned her accountants Bromhead & Co for advice.

23.	Her accountant Mr Curtis and his assistant were both unavailable when she telephoned.   She spoke to someone else at the firm, whose name she no longer recalls.  She told us that she could not remember exactly how the conversation went, but she was adamant that she asked how she should complete the Request for Information, and that the individual with whom she spoke informed her that it was appropriate to complete the Request with the date “9 May 2005” in answer to the questions on both page 1 and page 2 of the Request.

24.	The Appellant told the tribunal that, whilst she appreciated that the individual with whom she had her conversation was not a VAT specialist, nevertheless it was presumed between them that that individual had sufficient knowledge to deal with her enquiries as to how she should complete her answers to the Request for Information.

25.	As there is or may be an issue between the Appellant and her accountants as to what may have been said between them, and the nature of the advice if any provided, we draw no conclusions in that regard.  We have heard only what the Appellant herself has had to say.  However she came across to us as an honest and credible witness, and we accept that she would not have answered “9 May 2005” to the questions on pages 1 and 2 of the Request for Information without believing that she had the support of her accountants in so answering.

26.	The fact however remains that she then, as we find, sent her replies straight to HMRC, without affording the accountants an opportunity to check them.  We feel that, had the replies passed across Mr Curtis’s desk, the appropriateness of the date “9 May 2005” on page 2 of the form would have been revisited.

27.	Appearing for HMRC, Simon Chambers submitted that 9 May 2005 was the conscious choice of the Appellant as the date from which she wished to be registered.  HMRC had been invited, he said, to treat that date as her preferred date for registration, on the basis that the replies to the Request for Information were to be treated as part of the original application in Form VAT 1.  

28.	All that remained, Mr Chambers submitted, was for HMRC to agree to the Appellant’s expressed preferred date.  There was no reason for HMRC not to agree, so they did so, and gave effect to the registration as from that date.

29.	Mr Chambers said that there is no provision made by VATA or elsewhere for altering a date of registration openly agreed in that way.  If the position for establishing the date of registration were any less specific, HMRC would often not know where they stood when processing applications.  Mr Chambers did not accept that 9 May 2005 was a mistake, but if it were, it was a mistake on which HMRC were fully entitled to rely.  In other words, there was no reason why the registration process should not have been completed with registration taking effect from that date.  

30.	For the Appellant, Mr Curtis submitted that HMRC had acted unilaterally in giving effect to the registration as from 9 May 2005.  The Appellant had wanted to be registered as from the completion of the processing of her application, as appeared from the Form VAT 1 as it originally stood: “As soon as number available”.  That could not be reconciled with the date 9 May 2005.  HMRC should have checked back with her when, having sent in her replies to the Request for Information, an apparent conflict as to the preferred date for registration arose.

31.	Mr Curtis accepted that the question as to the date of registration contained in the Request for Information was unambiguous, as was the reply given to it.  However the result was that the parties were at cross purposes.  There was no true agreement, because the Appellant did not appreciate the consequences of 9 May 2005 having been chosen as the date for registration.

32.	In our judgment, this appeal cannot succeed.  If this were a case of the Appellant having inserted “9 May 2005” in her replies per incuriam, one can see that the return of the replies might have led to an apparent agreement that was no true agreement at all.  But that is not the case before us. 

33.	The facts that we have found show that the insertion of that date in the replies was precisely what the Appellant intended.  She was determined to get the date right, so she telephoned her accountants to find out what date she should put.  From her telephone conversation, she understood that that was the date she should insert.  She therefore did so deliberately.  

34.	Moreover, when she sent off her replies, she intended that they should be acted upon.  The replies were sent in as part of the process of having herself registered for VAT.  She was not personally familiar with paragraph 9 of Schedule 1 of VATA, but we feel that she must have appreciated that, if HMRC agreed to the date 9 May 2005, that would end up as the effective date of her registration.

35.	Of course, she did not appreciate the consequences of the choice of date.  But we feel that she and her advisers should have appreciated what they were.  Although the Appellant may know little about VAT, Notice 700 explains what is involved in registration, in general terms.  The paragraph of that Notice dealing with voluntary registration, which is what the Appellant was engaged in, is paragraph 2.3.  That paragraph states:

“ … In all cases you should think carefully whether [voluntarily] registering will really benefit you.  If we agree to register you from an earlier date, you:

•	must account for VAT on all your taxable business supplies from that date

•	cannot apply later to change the date and

•	can recover input tax incurred in respect of your taxable supplies from that date”.

36.	We think that there was no reason for HMRC to suspect that the Appellant had not carefully weighed up the advantages and disadvantages of retrospective registration when she specified 9 May 2005 as the date from which she wished to be registered if possible.  HMRC did not know the balance between the Appellant’s inputs and outputs as from that date.  For all they knew, the method used by chambers for accounting for input tax might make retrospective registration an attractive proposition to her.  

37.	We accept Mr Chambers’ submission that there is no basis on which this tribunal can properly reopen the matter of the Appellant’s date of registration for VAT.  This is very much a case of being “hoist on one’s own petard”.   For the reasons expressed, we are satisfied that the Appellant’s registration for VAT as from 9 May 2005 must stand.

38.	This appeal is therefore dismissed.  The case may be restored to the list if desired for the limited purpose of argument as to costs.  We do, however, have some sympathy for the situation in which the Appellant finds herself, which we are satisfied is inadvertent.   It may therefore assist the parties to know that, without having had the benefit of argument, our provisional view is that this case may well be appropriate for no order to be made as to costs.

MICHAEL JOHNSON
CHAIRMAN

RELEASED: 26 October 2006

LON/06/163