In JJK Engineering Ltd v HMRC [2016] UKFTT TC05351 the First Tier Tribunal (FTT) allowed the company to backdate the change to their business category from "Architect, civil or structural engineer" to "Any other activity not listed elsewhere”.

A trader is responsible for selecting the appropriate percentage for his category of business when joining the VAT flat rate scheme, and HMRC’s policy is that they will not change this category retrospectively as long as the choice is reasonable.

  • Mr Ward is a director of JJK Engineering Ltd, providing his services as a Mechanical Engineer and Project Manager through the company.
  • His work is almost entirely connected with plant and equipment.
  • On applying for the VAT rate scheme in 2008 he selected “Architect, civil or structural engineer” on the advice of his accountant.
  • In 2015 his accountants requested that HMRC change his category to “Any other activity not listed elsewhere” and for this change to be backdated for four years.
  • HMRC agreed to change the category going forward, but refused to apply the change retrospectively as his original choice had not been unreasonable.

The FTT allowed the appeal saying:

  • “Architect, civil and structural engineer” is a narrow description of professions which are concerned with land and buildings.
  • They agreed with the decision in Idess Ltd that “civil engineers” did not include all engineers.
  • The choice of sector was not reasonable because it did not describe the business that the company actually carried on.


This is the first case that we have seen since HMRC updated its guidance on selecting a Flat Rate Scheme percentage in VAT Notice 733 in light of criticism from professional bodies and losses at the FTT.

Businesses who followed HMRC’s original guidance, which directed mechanical engineers to choose “architect, civil and structural engineer”, could now make a similar claim to backdate their change of category and receive a repayment.

The percentage difference between these two categories is 2.5%.


HMRC update guidance on selecting a Flat Rate Scheme percentage

Flat rate scheme

Case reference: JJK Engineering Ltd v HMRC [2016] UKFTT TC05351

Cases referred to: Idess Ltd v HMRC [2014] UKFTT TC03638SLL Subsea Engineering v HMRC [2015] UKFTT TC04256