Deregistration

[philip1985]

To all,

I am currently in a middle of a VAT appeal, and just wanted to see if there is any legislation for the following.

We took over a business in 2002 and were told by HMRC that we had to register as they said we took over an going concern VAT register business in 2004, we did so and applied for deregistration at the same time which was refused based on that they could not forsee that our next 12 months would be below the regristration threshold, but in fact it was under the regristration threshold.

The accountant didn't phyiscally submit deregistration until Jan 2007.

My question is can is there any legislation that allows for deregistration to occur at an early date and becuase the actual turnover was under the regristration threshold can this be applied back when deregristration was originally submitted?

[spidersong]

There have been numerous tribunals lost by the taxpayer on very similar circumstances to your own. You could appeal against the decision not to deregister you, but since that decision is much more than 30 days old you're unlikely to get it entertained and you would have to prove that the evidience you provided to HMRC at that time was fairly conclusive in showing that your turnover would be below the threshold, and that no reasonable person could have formed the conclusion that you would be above the threshold.

Your case of course wont be helped by the fact that even after your turnover dropped you decided to remain registered for a year or two, you say you applied in 2004 and your turnover through 2005 was below the limit but you didn't deregister until 2007?

There's no legislation that allows for retrospective voluntary deregistration, and your only hope would be showing that HMRC's actions were unreasonable AT THE TIME. The fact that subsequently your turnover was below the threshold won't carry that much weight it's the evidence available when you requested dereg that is important. Incidentally how far below the limit were you?

[philip1985]

These were the turnover for the business for the following years, all of which below the registration threshold.

31/07/04 57517
31/07/05 55711
31/07/06 58117

When I spoken to the accountant he said he didn't know about threshold limits and no VAT return was actual done until 2006 when VAT inspector came to visit the business. So My dad having no knowlegde of procedures didn't know anything about this.

HMRC didn't charge VAT even though they knew we were registered for all these years then a £30000 bill came shortly after the VAT return was submitted.

I mentioned before HMRC informed us to register because we took over a going concern business and was previously registered, but on our agreement it was just a transfer of goodwill and business assets it had no VAT mentioned or even 12 month turnover.

What would be the stongest form for appeal if any?

If VAT fails is there a claim for negliance on the accountant behalf or has he acted reasonably?

[jpcentral]

Are the turnover figures inclusive or exclusive of VAT?

If they are exclusive, the VAT would take them above the threshold.

[philip1985]

These figures provided are inclusive of VAT. We have already amended the tax returns which I have seen these turnover drop to around £46,000 which will be the exclusive part.

[spidersong]

I would say you're wasting your time on this one with any appeal to the VAT office.

I'm assuming that you're not aware that there are two limits involved with VAT, the registration limit, and once you're registered a deregistration limit which is usually £2000 lower. The relevant thresholds at the times you've quoted were:

31/07/04 - £56,000 - You're turnover was £1,517 above the limit.
31/07/05 - £58,000 - £2289 below the limit.
31/07/06 - £59,000 - £883 below the limit.

You could've applied for dereg in 2005 possibly, as it turns out you were above the threshold in 2004 when you actually asked for dereg so you can't really argue that HMRC's decision was unreasonable, since you were above the relevant threshold and legally required to be registered. It would appear to me that any projections you could make from your trading figures would indicate that turnover may be near the dereg threshold but wouldn't conclusively be below it, and so you would've failed to prove you would be below the threshold, only that it could go either way. You may be able to argue the decision was unreasonable if there was a significant and unforseen change in business circumstances that resulted in the extra income and prior to that the income had been almost certain to be below the limit, but this seems unlikely.

So this leaves you with the fact that when asked about dereg HMRC took a reasonable decision that your turnover had been above the limit and would probably remain so and thus refused deregistration. In mid 2005 you may have been in a position to request deregistration but failed to do so, and ditto in 2006, it's not HMRC's fault that you didn't ask them to deregister you, and since there is no legal basis for backdating a voluntary deregistration and no error on HMRC's part my opinion (based on the limited facts available) would be that any appeal on the deregistration date is going to fail.

As to your accountants liability in the matter, that really lies between the two of you. You know what areas of the business you asked the accountant to look at, you know what information you made available to them, you know what the terms of engagement were etc. so it's up to you to decide whether it's worth trying to claim for negligence.

The only area you may have been able to try arguing is that there wasn't a transfer of a going concern and you had no liability to register initially, but goodwill and business assets are enough for something to be a business transfer. Also I'm confused on the dates - You took over the business in 2002, but didn't register till 2004 (from what date did you register?) and then didn't submit any VAT returns till 2006. If HMRC told you that you needed to register in 2002 or 2004 then any appeal against this will start off shakey, if not impossible, as you only have 30 days to appeal against a decision by HMRC and 2002 and/or 2004 are a bit longer ago than that.

[philip1985]

We took over the business in July 2002, In 2004 we were told by HMRC to Register as we took over an going concern business that was VAT registered, so registration is from 2002 when the business started.

HMRC has treated this as an appeal but was in agreement with the decision made in 2004 but didn't give much explanation. They have given me 30days for the review to be looked at independant from this case or tribunal.

[spidersong]

I think I need to go back to basics here, what is it they're actually reviewing, what decision have you appealed against?

Were you actually granted deregistration in 2007, or has your registration gone on even further than this?

From what's been said I'd have thought you have virtually no chance of geting the business deregisterd at any time before January 2007, when your accountant finally submitted an actionable request for deregistration.

[philip1985]

I put in an appeal in December 2008 of which I appealed against the transfer of the business because on our legal documents it doesn't mention it VAT position or the previous business turnover so from a legal side this is a transfer of goodwill. So I said there was no registration required so no VAT due.

Whether The VAT deregistration was correctly refused because HMRC had no information at the time and the fact that we were actual under the registration threshold in 04, 05, 06 as mentioned early.

And whether 05 and 06 are liable because this is well under both regristration and deregristration.

and the fact that HMRC havn't chased for unpaid VAT liabilties from 2002 when they told us to register in 2004 so VAT liabilities built up to such amount which was difficult to correct or for my father to know to deregister.

We successfully deregister in Jan 2007.

As if VAT appeals then we may face bankcrupcy.

[philip1985]

Hi Spidersong,

I've not heard back from you for a while, just wanted some advice regarding the appeal as I only have a few weeks to put a revised appeal again.

Cheers