In Hayley's Hair Design v HMRC  TC04505 the first tier tribunal (FTT) upheld the decision by HMRC that the taxpayer should be de-registered for VAT from the date that they received her application rather than the date that her turnover fell below the relevant threshold.
The facts of the case are relatively straightforward:
- Hayley Mundy ran a hairdressing salon, which she expanded to include a beauty salon
- The turnover of the combined business exceeded the VAT threshold and so she registered for VAT
- At Eastertime 2013 she sold the beauty salon
- On 8 April 2014 she noticed that her turnover had fallen below the de-registration threshold and she contacted her accountant who sent her a de-registration form to complete on 13 May 2014
- Mrs Mundy completed the form and dropped it off with her accountant on 20 May 2014
- HMRC did not receive it until 3 June 2014
The legislation in VATA 1994 Schedule 1 Paragraph 13 provides two routes to de-registration:
- if she can show HMRC that she is no longer liable to be registered then registration is cancelled from the date the application is made
- if she can show HMRC that she has ceased to be registrable then registration is cancelled from the date that she ceased
The FTT considered that Mrs Mundy made her request on the date that the de-registration form was received by HMRC i.e. 3 June and so her only possible recourse was under the second route.
The FTT considered that the meaning of 'ceased to be registrable' meant that she must have ceased to be liable to be registered, and ceased to be entitled to be registered.
She was still entitled to be registered after 8 April 2014 as even though her taxable turnover had fallen below the threshold she was still making taxable supplies and therefore entitled to voluntarily register for VAT.
The FTT considered that as she could be voluntarily registered then she had not ceased to be registrable and so could only be de-registered under the first route, that is from 3 June when HMRC received her application.
The delay of almost two months between Mrs Mundy telling her adviser that she wanted to de-register for VAT and the application being received by HMRC could have been avoided had Mrs Mundy's accountant simply advised her to de-register using HMRC's online facility. VAT registration can be cancelled through the same account which is used for online filing of Returns.
Useful links and small print:
Legislation: VATA 1994, Schedule 1, Paragraph 13