In Onyx of Leicester Limited v HMRC [2017] TC05773, the First-Tier Tribunal (FTT) concluded that it was unreasonable for HMRC to have concluded that a taxpayers registration date could not be revised to a new date, five months later.

  • Onyx voluntarily applied to be registered for VAT on 2 January 2013
  • It proposed a registration date of 1 December 2012
  • The application was accepted on 29 January 2013 and Onyx was registered with effect from 1 December 2012
  • On 8 February 2013 HMRC confirmed that Onyx could use the flat rate scheme effective 1 December 2012
  • Onyx began charging VAT from 1 May 2013, the start of its next accounting year.
  • HMRC issued an assessment and the Director said to change the registration date to the start of his financial year.

During HMRCs review of the case, they said that the effective date of registration could not be changed.

The FTT held that HMRC had not made a decision which a reasonable body of commissioners could make:

  • HMRC did not follow their own internal guidance which allows the date to be changed in rare cases
  • There was no evidence that the internal guidance had been satisfactorily considered
  • HMRC were responsible for submitting the case to another department if necessary, whereas their letter to the client indicated that it was not there responsibility to do so
  • No written record of the decision was kept, despite the importance of such evidence as stressed by the internal guidance
  • All of Onyx’s customers were VAT registered and would have been entitled to recover the VAT. There was no loss of VAT to HMRC.

The FTT also considered the basis on which the taxpayer entered 1 December 2012 as the registration date:

  • They did so because they had an awareness of a rule allowing the recovery of VAT on services received for up to 6 months prior to registration and on that basis chose a date 5 months earlier than the date they intended to start charging VAT
  • Although 1 December was intentionally entered into the form, it was done so because of a genuine misunderstanding and not an error of judgement

Although this decision does not amount to acceptance that the taxpayer could change the registration date to 1 May 2013, it meant that HMRC’s decision was thrown out: another officer has to review the case again and based on the FTT’s comments, it is likely that the taxpayer’s request will be accepted.


Case reference: Onyx of Leicester Limited v HMRC [2017] TC05773


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