La Roche v Revenue & Customs

Factual and Procedural Background

The Appellant purchased a second-hand curtain retail business in May 2000, continuing under the existing VAT registration. She traded without issue until July 2008, when she was hospitalised and subsequently closed the shop on 20 December 2008. The Appellant sent a letter dated 8 December 2008 to HMRC enclosing a VAT 7 form, applying to cancel her VAT registration effective 20 December 2008, citing reduced turnover and closure of the business.

HMRC never acknowledged receipt of this application and continued to treat her as registered for VAT, issuing assessments and demands for VAT payments. The Appellant made some payments and submitted outstanding returns in late 2011 and early 2012. She formally applied for retrospective deregistration in February 2012, which HMRC granted only with effect from 17 February 2012. Her request for backdating to 20 December 2008 was refused by HMRC, citing non-receipt of the original application and outstanding VAT returns at that time.

The Appellant appealed HMRC’s refusal to cancel her VAT registration effective 20 December 2008. The Tribunal heard evidence, including the Appellant’s testimony, which was found credible. The Tribunal considered relevant statutory provisions and prior case law in reaching its decision.

Legal Issues Presented

1. Whether the Appellant’s application to cancel VAT registration with effect from 20 December 2008 was received by HMRC before that date.
2. Whether the Appellant was liable to be registered for VAT with effect from 20 December 2008, considering her taxable turnover and business activities.
3. Whether HMRC was justified in refusing to backdate the cancellation of VAT registration to 20 December 2008 under paragraph 13, Schedule 1, VAT Act 1994.

Arguments of the Parties

Appellant's Arguments

• The Appellant asserted that she submitted a VAT 7 form and covering letter on 8 December 2008 requesting cancellation effective 20 December 2008.
• She argued that her turnover had fallen below the VAT threshold from that date and that she was no longer liable to be registered.
• She maintained that HMRC never informed her that her original application had not been received or accepted.
• The Appellant contended that the refusal to backdate the deregistration was incorrect and sought cancellation effective from 20 December 2008.

Respondents' (HMRC) Arguments

• HMRC maintained that they never received the December 2008 application and only received a deregistration request in February 2012.
• They argued that the Appellant remained liable to be registered after 20 December 2008 because she continued to make taxable supplies, albeit at reduced turnover.
• HMRC relied on paragraph 13(1) and (4), Schedule 1, VAT Act 1994, stating that cancellation cannot take effect before the date of the request and only if the person is not liable to be registered at that time.
• They cited outstanding VAT returns and non-compliance with VAT Regulations 1995 as reasons to refuse backdating.
• HMRC referred to prior Tribunal decisions, including the Peter Vass appeal, to support their position on non-receipt and non-acceptance of deregistration applications.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Peter Vass (TC00510)	Non-receipt of deregistration application and procedural requirements for VAT cancellation.	Distinguished on facts; unlike Peter Vass, the Tribunal found the Appellant’s application was sent and received by HMRC.
Ian & Gaynor Tindsley (t/a Padway Nurseries) (Decision No. 18571)	Procedural and evidential standards for VAT deregistration applications.	Referenced by HMRC in support of their procedural arguments but not determinative in this appeal.
Neil and Alma Grogan (t/a Vale Plus) (Decision No. 16084)	Standards for proving deregistration requests and compliance with VAT regulations.	Referenced by HMRC but the Tribunal found the Appellant’s evidence sufficient to distinguish this case.

Court's Reasoning and Analysis

The Tribunal found on the balance of probabilities that the Appellant did submit a valid VAT 7 form and covering letter on 8 December 2008, which HMRC received but presumably misplaced. This fact distinguished the case from the Peter Vass appeal, where no receipt was found.

The Tribunal analysed the relevant statutory provisions under the VAT Act 1994, particularly paragraph 13(1) and (4) of Schedule 1, which require that cancellation can only take effect from the date of the request or a later agreed date, and only if the person is not liable to be registered at that time.

The Tribunal found that as of 20 December 2008, the Appellant was not liable to be registered because her taxable supplies for the following year would not exceed the threshold of £43,000, and this was not due to cessation or suspension of supplies for 30 days or more, satisfying paragraph 4(1) and (2) of Schedule 1.

HMRC’s argument that outstanding VAT returns and non-compliance prevented cancellation was rejected, as the Tribunal accepted that no legislative provision prevented deregistration in such circumstances.

The Tribunal acknowledged that HMRC’s satisfaction of non-liability to be registered could be made at a date later than the date of the request, consistent with the statutory framework, and found it unreasonable for HMRC not to be satisfied that the Appellant was not liable to be registered with effect from 20 December 2008.

Holding and Implications

The Tribunal ALLOWED the Appellant’s appeal, holding that HMRC ought to have cancelled her VAT registration with effect from 20 December 2008.

As a consequence, any VAT paid on supplies made after 20 December 2008 should be repaid to the Appellant. The decision does not establish new precedent but clarifies the application of paragraph 13, Schedule 1, VAT Act 1994 in circumstances where an application to deregister was made but not acknowledged by HMRC. The ruling underscores the importance of HMRC’s obligation to consider deregistration requests properly and the Tribunal’s role in assessing receipt and liability to be registered.