In Holy Cow! Ice Cream Company Ltd v HMRC [2019] TC7400 the FTT denied a loss making business' appeal to backdate entry into the VAT Flat Rate Scheme (FRS). Although survivial of the business was an issue, VAT returns had already been filed and the directors were propping up the company personally.

HMRC granted the application on 10 November 2017, but only with effect from 1 July 2017 on the basis of HMRC’s guidance which states that backdating is not allowed for VAT periods for which a trader has already calculated its liability, because “the FRS exists to simplify VAT accounting and record keeping for small businesses”. HMRC’s guidance also states that this policy may be disapplied in “exceptional circumstances”, such as where “the survival of the business” is in issue.

The Company appealed against the refusal to backdate for the first two quarters, on the basis that it was within the “exceptional circumstances” part of HMRC’s guidance.

The FTT considered 'exceptional circumstances': it found it difficult to think of any such situations where they may exist.

The FTT rejected the appeal, deciding that:

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Holy Cow! Ice Cream Company Ltd v HMRC [2019] TC7400