United Kingdom VAT & Duties Tribunals Decisions

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URL: http://www.bailii.org/uk/cases/UKVAT/2005/V19179.html
Cite as: [2005] UKVAT V19179

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Derek Gordon Cooper and Lynne Margaret Cooper v Her Majesty's Revenue and Customs [2005] UKVAT V19179 (20 July 2005)

SUMMARY —

19179

MANCHESTER TRIBUNAL CENTRE

DEREK GORDON COOPER

and LYNNE MARGARET COOPER Appellants

- and -

HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: Colin Bishopp (Chairman)

Sitting in public in Manchester on 22 June 2005

Derek Cooper, partner, for the Appellants

Joanna Vickery, counsel, instructed by the Acting Solicitor for HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2005


 


DECISION
1. The Appellants, Derek and Lynne Cooper, trade in partnership supplying debt management services under the name "Eurodebt NW". Mr Cooper alone brought the appeal but nothing turns on that error and we treat this as an appeal brought by both partners. They appeal against the Respondents' refusal to allow them input tax credit for the tax incurred by them on the cost of supplies to them obtained for the purpose of their business.
2. Mr and Mrs Cooper were already registered for VAT since they had been engaged in taxable businesses when they started the debt management service on 1 September 2003. The business is a franchise and Mr Cooper, who represented the Appellants at the hearing, told us that the franchisor advised him, when he took on the business, that he would be required to charge VAT to the Appellants' clients. He also telephoned his local VAT office which told him (as the Respondents accept) that the Appellants could not continue to use their existing registration , and must register the new business separately. That advice was wrong in two respects. First, the supply of debt management services is exempt: see Debt Management Associates Limited v Customs and Excise Commissioners (2002) VAT Decision 17880 and a trader making only such supplies is not eligible to be registered at all. Second, the Appellants could not lawfully be registered twice. The Respondents have acknowledged that mistake and have apologised for it, but it is entirely understandable that the Appellants were confused by the information they were given. They did apply for further registration and began to charge VAT to their clients; they have accounted to the Respondents for that tax (we mention in passing that they had since given up their other business, but that fact does not affect the outcome of this appeal).
3. The Appellants should not have charged VAT on the fees charged to their clients, but whether the Respondents should make a refund to them which they can in turn pass onto those clients is not an issue before us. Mr Cooper's complaint was that other franchises, having been given similar advice by the franchisor, had registered for VAT, had claimed the input tax they had incurred and had received repayments from the Respondents. He did not produce any evidence to support the claim but we are willing to accept for present purposes that it is correct. We should perhaps add that until the Debt Management Associates direction was released, there was some confusion about the proper treatment for VAT of debt management services – the Respondents maintaining that some part of the service, at least, was standard-rated and it may be that the franchisor was unaware of the decision and the Respondents' acceptance that it was correct.
4. Unfortunately for the Appellants, that does not help them. If a trader's supplies are wholly exempt, as the Appellants' are, the input tax incurred by the trader is not recoverable: see Value Added Tax Act 1994, Section 26. It is not within this tribunal's power to direct the Respondents to treat a trader incorrectly, even if mistakenly, they are treating other similar traders incorrectly. Nor can we deal with complaints about inaccurate advice, though we should perhaps make the comment that, even if we could, we should not think it appropriate to direct the Respondents to allow to the Appellants the input tax relief for which, had they been properly advised, they would know they had no legitimate claim.
5. We recognise that Mr Cooper is justifiably aggrieved by the incorrect advice he received, but we are compelled to dismiss the appeal. Joanne Vickery of counsel, who appeared for the Respondents, did not seek a directive in respect of costs.

COLIN BISHOPP

CHAIRMAN
Release Date: 20 July 2005

MAN/04/0191