VAT Tribunal – Flat rate scheme
An interesting VAT tribunal case concerned whether a journalist who had been registered for VAT since 1989 was allowed to make a back-dated application to join the VAT Flat rate scheme. This is a scheme which allows small businesses to simplify their VAT accounting processes and in some cases can result in a reduced amount of VAT due to HMRC.
In this case, the journalist was unaware of this scheme when it was introduced in 2002 and was also not advised of the advantages of the scheme when he was visited by a HMRC officer in 2004. The appellant only became aware of the scheme during the last year and calculated that he would have saved over £20,000 by using this scheme.
An application for a back-dated application was rejected by HMRC hence this matter ending in an appeal to the Tribunal. The appellant argued that due to ‘exceptional circumstances’ his back-dated application should be allowed. The Chairman agreed that HMRC should have been more explicit in informing the appellant about the scheme and encouraging its use. The Chairman allowed the appeal in part but limited the back-dating of the application to three years.
Although Tribunal cases are not legally binding, small businesses and sole-traders (with turnover of less than £150,000) who have not explored using the flat rate scheme are likely to consider making claims. This could result in an increased take up of the flat rate scheme as well as significant repayments from HMRC.