In T Hughes v HMRC [2018] TC06609, the First-Tier Tribunal (FTT) found that a pub intending to close part of every year to remain under the VAT threshold had crossed the threshold and had no reasonable excuse for not registering.

  • In 2010 the taxpayer acquired a pub intending to run a pub restaurant, and provide accommodation.
  • In the 12 months to May 2011 the business exceeded the VAT turnover threshold and should have Registered.
  • It was the tapayer's intention to trade below the VAT threshold and to close the accommodation part of the business from 1 December to 31 March each year.
  • This closure did not happen in 2012 due to the taxpayer being unable to carry out building works on the pub himself due to injury. This meant a builder had to take over and more money was required to fund the additional unplanned costs.
  • This meant the business traded over the VAT threshold until 30 November 2012.
  • From 2013 onwards, the business closed the accommodation side for part each year and traded below the VAT threshold.
  • HMRC assessed the taxpayer for VAT due between 1 July 2011 and 30 November 2012 as well as charging penalties.

The taxpayer appealed:

  • There was no disagreement over the turnover figures.
  • The taxpayer believed that the backward looking rolling turnover test is weighed heavily in HMRC’s favour and is not fair and reasonable.
  • The taxpayer claimed that the excess of turnover of around £5,000 in the year to May 2011 resulted in a bill of over £9,000 which was unfair.
  • As the intention of the business was not to open between December and March it could not have been envisaged that the threshold would be crossed.
  • The taxpayer contended a different calculation method should have been used to establish if he should have registered for VAT.

The FTT dismissed the taxpayers appeal:

  • The obligation to check whether the VAT threshold is crossed is the taxpayers.
  • The taxpayer did not carry out the backward looking turnover threshold test and so did not realise the threshold was exceeded. HMRC simply did what the taxpayer should have done, using the same figures that the taxpayer would have done.
  • The taxpayer had all the information needed to establish turnover and to check it against the threshold. If he had done so, he would have seen the threshold was crossed.
  • There was no reasonable excuse for the Failure to notify and no special circumstances.


VAT thresholds

Registering for VAT

Penalties: Failure to notify

External link: T Hughes v HMRC [2018] TC06609