First-tier Tribunal (Tax)

[2009] UKFTT 252 (TC)

TC00200

VAT – Flat Rate Scheme – Appellant applied incorrect percentage leading to overpayment – repayment by the Commissioners capped – statutory provisions cannot be overridden by circumstance – appeal dismissed

FIRST-TIER TRIBUNAL (TAX CHAMBER)

                            MALCOLM HUTCHINSON T/A CLIFTON FISHERIES        Appellant

- and -

THE COMMISSIONERS FOR

                                      HER MAJESTY’S REVENUE AND CUSTOMS         Respondents

Tribunal:        Lady Mitting (Judge)

                        Howard Middleton FCA (Member)

Sitting in public in Manchester on 4 August 2009

The Appellant appeared in person

Mrs. Kim Tilling, instructed by the General Counsel and Solicitor to Her Majesty’s Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2009

DECISION

1.           Mr. Hutchinson trades as sole proprietor of a take-away fish and chip shop.  He has been registered for VAT with effect from 1 August 1983 and with effect from 28 February 2003 he has operated under the Flat Rate Scheme.  It was accepted by the Respondents that for periods 01/04 to 07/08, Mr. Hutchinson made an overpayment of tax in the sum of £5,774.  By letter dated 9 December 2008, Mr. Hutchinson advised the Respondents of his overpayment and made a claim for repayment.  The Respondents allowed his claim in the sum of £3,333 but refused payment of the balance of £2,445 as that element of the claim arose more than three years before the “relevant date” as set out in Section 80 VAT Act 1994.  It is against that refusal that Mr. Hutchinson now appeals.

2.          We heard oral evidence from Mr. Hutchinson and an unchallenged witness statement was put in by the Respondents from Mrs. Rachel McDougall.

3.          When Mr. Hutchinson was first accepted onto the Flat Rate Scheme the applicable percentage for him to apply was 13%.  At the end of 2008, when the VAT rate was reduced from 17.5% to 15%, all traders were advised of this by letter, including Mr. Hutchinson, and on receipt of his letter he re-checked the flat rate applicable to his trade class and realised that it had been reduced from 13% to 12%, a change of which he had not been aware.  He found out that the change had taken place with effect from 1 January 2004 and that he had therefore been overpaying his tax from that date forward.  That was Mr. Hutchinson’s evidence, which we have no reason to doubt as it would, of course, have been in his interests to apply the lower percentage had he known of it.

4.          We were told that the Respondents sent out with every single return for Spring 2004, a publication headed VAT Notes Number 1 2004.  The quick check list of contents included “14. Flat Rate Scheme changes”.  Paragraph 14 refers to the percentage reduction with effect from 1 January 2004 and suggesting traders should check their own trade sector percentage by reference to the website.  The paragraph also referred recipients to an information sheet 17/03 with full details of the new table of flat rates and promised a new version of Notice 733, being the Flat Rate Scheme public notice.  The Respondents thus argue that full notice of the changes was given to all traders.

5.          It was Mr. Hutchinson’s case that he believed that he had not received in his spring 2004 return a copy of the Notes Number 1.  It was his practice to read any such notes which he received and had he done so he would have been alerted to the change.  If he did not receive the notes and thus did not read them, there would have been nothing to alert him to check the website and the other publications advertised within the Notes.  He believed that it would have been far more sensible for the Respondents to have written to every individual trader as they did when the overall VAT rate was reduced.  Mr. Hutchinson also pointed out that he had a routine VAT inspection on 4 February 2004 when the visiting officers made no mention to him of the change in rate - something which he believed it was incumbent upon them to do given the coincidence of the timing of the visit and the change of rate.  Mrs. Tilling responded to this that the visit was not an educational visit and was not comprehensive.  Its purpose was to check past returns and the corresponding trader’s records.

The legislation

6.          The legislation is to be found in Section 80 of the VAT Act 1994, the relevant sections of which read as follows:

“”[(1) Where a person –

(a)   has accounted to the Commissioners for VAT for a prescribed accounting period (whenever ended), and

(b)  in doing so, has brought into account as output tax an amount that was not output tax due,

the Commissioners shall be liable to credit the person with that amount]

     (2) The Commissioners shall only be liable to [credit or] repay an amount under this section on a claim being made for the purpose.

                [(4) The Commissioners shall not be liable on a claim under this section –

(a) to credit an amount to a person under subsection (1) or (1A) above, or

(b) to repay an amount to a person under subsection (1B) above,

            If the claim is made more than 3 years after the relevant date.]

               [(4ZA) The relevant date is –

(a) In the case of a claim by virtue of subsection (1) above, the end of the prescribed accounting period mentioned in that subsection.”          

Conclusions

7.          The Respondents accept that Mr. Hutchinson made an overpayment and have satisfied his claim for repayment so far as that claim falls within the statutory time limits.  The effect of section 80 is to provide an effective bar to claims more than three years before the relevant date.  There are no statutory provisions for reasonable excuse, hardship and no room for the Respondents to allow an extra statutory concession.  In effect the bar provided is absolute.  We know not whether Mr. Hutchinson received the Notes Number 1.  It seems unlikely that he would not received them as they would have gone out automatically with every single return, but for whatever reason he was either not made aware or did not make himself aware of the changes, hence his overpayment.  Whilst we sympathise with Mr. Hutchinson in the position which he finds himself, we cannot override clear statutory provisions and we must uphold the Respondents’ decision.

8.          The appeal is therefore dismissed.  The Respondents made no application for costs and no order is made.

MAN/2009/0171

LADY MITTING

JUDGE
Release Date: 2 October 2009