VAT deregistration post sale of business – Tribunal case
A recent VAT tribunal case examined the unusual circumstance where HMRC raised a VAT assessment on a business that had already deregistered from VAT. The Judge’s comments include a point of wider interest.
The case concerned a plumber and central heating engineer who claimed that he sold his business and retired in 2001. HMRC suggested that they had evidence that the plumber had continued in business until 2004 and should have remained VAT registered until that time.
The evidence in this case pointed to a most unusual arrangement between the ‘retired’ plumber and the person to whom the business was allegedly sold in 2001. According to the Tribunal Judge ‘it very much sounded as if no accountant or solicitor had been involved in clarifying the form of what at best may have been a vague and very likely muddled arrangement‘.
At the time of the Tribunal hearing in July 2009, the plumber was over 80 years of age, in poor health and recently out of hospital. The taxpayer contended that he was living off the state pension and was unable in any case to pay a VAT assessment for over £19,000 plus interest.
The Tribunal judge accepted that HMRC had acted in proper manner and had evidence that VAT was properly due. However, it was not evident that the taxpayer made false claims but rather significantly misunderstood his filing requirements. The taxpayer’s appeal was dismissed but was accompanied by a strong plea from the Tribunal Judge. He asked that HMRC show considerable restraint in seeking payment of the assessment and penalties due.