30/03/2004 03 0592 TINDSLEY (T/A PADWAY NURSERIES) Mr I E Vellins  Manchester 30 March   
	 — Value Added Tax — voluntary de-registration —whether de-registration should be retrospective — paragraph 13(1) Schedule 1 VAT 1994 — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

 
 	
	IAN & GAYNOR TINDSLEY (T/A PADWAY NURSERIES)	Appellants

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	 Mr I E Vellins (Chairman)

Sitting in public in Manchester on 30 March 2004

Mr P Wilding, Accountant for the Appellants

Miss L Linklater, counsel instructed by the Solicitor’s office for the Customs and Excise for the Respondents

	© CROWN COPYRIGHT 2004

DECISION

1.	In this appeal the Appellants are Ian Tindsley and Gaynor Tindsley trading as Padway Nurseries from an address in Preston, Lancashire.  They appeal against the decision of the Respondents, the Commissioners of Custom and Excise, who, on 19 June 2003, cancelled the VAT registration of the Appellants with effect from close of business on 23 May 2003.  The Appellants requested that their VAT registration be cancelled from 24 March 2003.  The Respondents reconsidered the Appellants’ request for the effective date of de-registration to be 24 March 2003, but in a letter dated 14 July 2003 the Respondents notified the Appellants that the Respondents were not prepared to retrospectively date back the effective date of de-registration till 24 March 2003.
2.	At the hearing of this appeal at Manchester on 30 March 2004 the Appellants were represented by their accountant Mr P Wilding.  The Respondents were represented by their counsel Miss L Linklater.
3.	The background to this appeal is that the Appellants were a partnership carrying on business as a garden nursery from premises in Lancashire.  They were registered for the purposes of VAT with effect from 1 February 1985.
4.	On 23 May 2003 the Respondents received a letter dated 19 May 2003 from the Appellants’ accountants Wildings.  In that letter Wildings stated that they had written to the Respondents on 24 March requesting that the Appellants’ business be de-registered with effect from 31 March 2003 because it had a turnover significantly below the level at which it could de-register and the partners had decided that they should de-register from the end of March 2003.  The letter pointed out that the Appellants had still not received their final VAT form and had in fact received one for the quarter ended 30 April 2003.  The Appellants requested that the Respondents cancel this return and issues a final return to 31 March 2003.
5.	The Respondents had not received the letter from the Appellants’ accountants Wildings of 24 March 2004.
6.	On 6 June 2003 the Respondents received a further letter dated 5 June 2003 from Wildings referring to their previous letters of 24 March and 19 May.  On 16 June 2003 Mr Tindsley contacted the Respondents’ enquiry centre and requested a VAT registration cancellation form and on 18 June 2003 Mrs Tindsley contacted the enquiry centre following receipt of a central assessment.
7.	Wilding’s letter of 19 May 2003 was not processed by the Respondents until 19 June 2003.  An officer for the Commissioners informed Wildings on 19 June 2003 that the request to cancellation of the VAT registration could not be backdated to 31 March 2003 as the Respondents had not been in receipt of any form of request for cancellation until 23 May 2003.  The officer confirmed the VAT registration would be cancelled with effect from 23 May 2003.  By letter dated 19 June 2003 the Respondents informed the Appellants that their VAT registration was cancelled with effect from close of business on 23 May 2003.  Correspondence then ensued between the parties and further representation were made on behalf of the Appellants by Wildings.  The Respondents considered these representations and reviewed their decision and by letter dated 14 July 2003 the Respondents informed the Appellants that the decision was confirmed and that the cancellation with effect from 23 May 2003 would not be backdated till 31 March 2003. 
8.	The Appellants appealed and in their grounds of appeal dated 28 July 2003 submitted that their accountant had sent a letter dated 24 March 2003 to the Respondents, and that the letter had been posted by the accountant, and complaining that the Respondents did not action their request and ignored the two subsequent letters.
9.	At the hearing of the appeal evidence was given by the Appellants accountant Mr P Wilding.  He said that the Appellants’ turnover had been falling and they should have applied for de-registration more than one year earlier.  The Appellants were a small business and larger customers were leaving them, with the Cooperative Society as their only major large customer.  The Appellants did not wish to alert the Cooperative Society of their falling turnover by applying for de-registration as they feared that the Cooperative Society would take its business away from the Appellants completely.  Mr Wilding said that in March 2003 he discussed with the Appellants his advice that they should de-register at the end of March 2003, and he said that the Appellants instructed him on 21 March 2003 to apply for de-registration.  This was in response to a letter Mr Wilding had sent to the Appellants on 7 March advising de-registration.
10.	Mr Wilding said that on 24 March 2003 he wrote to the Respondents at their office at Cheadle, Cheshire stating “the business wishes to be de-registered with effect from 31 March because it has a turnover significantly below the level at which they are eligible to de-register and the partners have decided de-register from the end of March.  Please issue the relevant forms so that our client can de-register from that date.  If you have any queries please do not hesitate to contact us”.  Mr Wilding said in evidence that he personally typed that letter and posted it himself on 24 March 2003.  He said that he did not enclose an application form VAT 7 which is the application form for cancelling a registration, because he did not have the relevant form.  He said that he did not receive a reply to that letter and therefore wrote a second request on 19 May 2003 and a third request on 5 June 2003 both of which he posted personally.  He said that by that stage the Appellants were panicking as they had not received any documents relating to de-registration, and he stated that not only did the Appellants telephone the Respondents, but Mr Wilding himself telephoned the Respondents and was told on the telephone that the Respondents had not received the first letter of 24 March, and could not trace having received the letter of 19 May but had received the letter of 5 June.  He said that the Respondents then subsequently confirmed that they had received the letter of 19 May.  He stated that the letter of 19 May was finally dealt with by the Respondents on 19 June 2003 when the Respondents cancelled the Appellants’ VAT registration but only from 23 May 2003 and not from 31 March 2003 as Mr Wilding wished.
11.	Mr Wilding also complained that when dealing with the Commissioners for another client, the Commissioners had denied receiving correspondence, but Mr Wilding had been able to prove to the Commissioners that he had sent correspondence as he had done so by fax and had retained a fax record of having sent the correspondence.  He said that he believed that the Commissioners were making errors and that the Commissioners must have received his letter of 24 March 2003 because he had personally posted that letter.
12.	Mr Wilding at the hearing accepted that he was the agent of the Appellants and that he should have familiarised himself with the procedure to apply for de-registration.  He accepted that he had not submitted an application form VAT 7 to cancel the Appellants registration.  He said that he did not have a form VAT 7 at his office and the purpose of his letter of 24 March 2003 had been to request the Commissioners to send the appropriate form so that the Appellants could apply on the appropriate form for de-registration.  He accepted that although he had posted his letter of 24 March 2003 to the Commissioners, he could not say that the letter had reached the Commissioners.  He accepted that he needed to satisfy the Commissioners before de-registration that the Appellants were no longer liable to be registered, but he said their turnover was so low that he had not envisaged any problems with the Commissioners in satisfying them that they should be de-registered.  Mr Wilding accepted that the mere fact that the Appellants had a turnover which had fallen below the threshold in itself did not automatically mean that they would be de-registered, and he accepted that the Appellants had needed to apply for de-registration.  Mr Wilding said that he had not obtained a form VAT 7 or submitted it before the end of March 2003 because he believed that it would require extra time and work on his behalf to do so at the expense of the Appellants, and he thought that it was routine for matter to be dealt with by way of correspondence to the Commissioners with the date of de-registration agreed in correspondence with the Commissioners.
13.	At the hearing an officer of the Commissioners Mr Stuart Sands gave evidence that he had been the officer who reconsidered the Appellants request for the effective date of de-registration to be backdated.  He gave evidence that all mail received by the Commissioners was scanned into an electronic filing system.  He had checked the records kept on file and confirmed that there was no trace of any letter date 24 March 2003 having been received by the Commissioners.  The Commissioners records were that the letter dated 19 May 2003 from Mr Wilding had been received by the Commissioners on 23 May 2003 and that the letter dated 5 June 2003 from Mr Wilding had been received by the Commissioners on 6 June 2003.  The case notes showed that an officer had contacted Mr Wilding on 19 June 2003 to confirm that there was no trace of his first request for de-registration and that the Commissioners would be unable to grant a back dated effective date of registration to 31 March 2003 but the Commissioners had informed Mr Wilding that the earliest effective date that they could accept at their discretion would be the date of receipt of Mr Wildings second letter which was received in the department on 23 May 2003, despite the fact that the Appellant had not in effect submitted a form VAT 7. 
14.	Miss Linklater submitted on behalf of the Commissioners that the appeal should be dismissed.  By the operation of paragraph 13(1) of Schedule 1 to the VAT 1994 where a registered person satisfies the Commissioners that he is not liable to be registered for VAT, the Commissioners shall if he so requests cancel his registration with effect from the day on which the request is made or such later date as maybe agreed.  She submitted it was not enough for a taxpayer merely to wish for a de-registration with effect from a particular date.  There was a double process in that an application or request must be received by the Commissioners for de-registration and further that the Commissioners must be satisfied that the taxpayer was no longer liable to registration.  Once the Commissioner are satisfied that a taxpayer is no longer liable to be registered for VAT by paragraph 13(1) the Commissioners could only cancel the registration from the date when the request was made or from such later date as may be agreed.  She submitted that there was therefore a fetter on the Commissioners and that they could not back date the effective date of de-registration.  The Commissioners had no record of ever having received Mr Wilding’s letter of 24 Mach 2003.  They had received Mr Wilding’s letter dated 19 May 2003 on 23 May 2003, and this was the earliest date from which the registration could be cancelled, at the discretion of the Commissioners, who had exercised that discretion even though they had never actually received an application form for the cancellation.
15.	Miss Linklater pointed out that the letter of 24 March 2003 that Mr Wilding said that he had posted was not in fact an application for de-registration, but at the most could be regarded as a request for the relevant form to be sent by the Commissioners to the Appellants.  She submitted that the Commissioners Notice 700/11/02 made it clear that a person wishing to de-register should complete an application form VAT 7 and satisfy the Commissioners that the turnover had fallen below the registration limit.  The Notice advises a taxpayer that the taxpayer should continue to charge an account for VAT until the Commissioners confirmed that the registration had been cancelled and that a taxpayer cannot apply for retrospective cancellation of registration.  She submitted that the Notice was in the public domain and Mr Wilding as a chartered accountant should have been aware of the contents of that Notice.
16.	Miss Linklater referred to the decision in Neil and Alma Grogan trading as Vale Plus, decision number 16084 where the tribunal considered the wording of paragraph 13(1), in the following terms “it will be noted that the legislation does not contain any power for the Respondents to agree to de-registration from any earlier date, that is, to agree to retrospective de-registration.  As noted, the Respondents were prepared to accept the date of the phone call on 9 July 1998 as indicating a wish by the Appellants to de-register but that there was in their records no trace of any earlier indication by the Appellants of such a wish.  More-over, the wording of the legislation also implies that there must be agreement between the trader and the VAT de-registration office before the cancellation can be effective — and that is the significance of the lack of acknowledgment of the receipt of the form in this case.  The legislation makes it clear that this is not a case where the tribunal has to consider whether or not the Appellants had a reasonable excuse for their failure to carry out the appropriate procedure to de-register at an earlier date.  The tribunal in this case is bound by the provisions of paragraph 13(1).  Accordingly the appeal must fail”.
17.	Mr Wilding submitted that in common sense, to ensure justice being done, the Commissioners should have de-registered with effect from 31 March 2003.  He submitted that he had personally posted the letter of 24 March 2003, and he felt that the Commissioners had been delaying matters by not dealing promptly with his letters.
18.	In this appeal the facts and the law are clear.
19.	In March 2003 the Appellants on the advice of their accountant Mr Wilding considered that they should de-register as their turnover for some time had fallen below the level or threshold where they were liable to be registered for VAT.  The Appellants’ accountant Mr Wilding wrote a letter addressed to the Cheadle Cheshire office of the Commissioners on 24 March 2003 asking the Commissioners to issue “the relevant forms” so that the Appellants could de-register from the end of March 2003.  I am satisfied that the Commissioners did not receive that letter.  I am further satisfied that no application form for de-registration was ever sent by the Appellants or received by the Respondents.  I further find that the Commissioners on 23 May 2003 received a letter from Mr Wilding dated 19 May 2003 requesting de-registration with effect from 31 March 2003.  Although no application form for de-registration had been submitted I am satisfied that at the discretion of the Commissioners, the Commissioners on 19 June 2003 issued a cancellation notice cancelling the Appellants’ VAT registration from close of business on 23 May 2003, that being the date on which the Commissioners had received Mr Wildings’ letter of 19 May 2003.  I am satisfied that 23 May 2003 was the earliest date on which the registration could be cancelled, and that the Commissioners had no power to grant retrospective cancellation from 31 March 2003.
20.	13(1) to Schedule 1 of the Value Added Tax Act 1994 provides :- 
“… where a registered person satisfies the Commissioners that he is not liable to be registered under this schedule, they shall, if he so requests, cancel his registration with effect from the date on which the request is made or from such later date as may be agreed between them and him”.
21.	I agree with the tribunal Chairman in the Neil and Alma Grogan trading as Vale Plus case that the legislation does not contain any power for the Commissioners to agree to de-registration from any earlier date, that is to agree to retrospective de-registration.
22.	I find that the Commissioners acted reasonably in being prepared to accept their receipt of Mr Wildings’ letter of 23 May 2003 as indicating a request by the Appellants to de-register, despite no VAT 7 application form having been submitted, and 23 May 2003 was the earliest date on which there could have been any agreement for the cancellation to be effective.
23.	I find that the Commissioners and the tribunal are bound by the provisions of paragraph 13(1) of Schedule 1 of the Value Added Tax Act 1994, and accordingly I must dismiss the Appellants’ appeal.
24.	The Commissioners indicated that they were not seeking an order for costs and I make no order for costs.
25.	Appeal dismissed.

MR I E VELLINS
CHAIRMAN
MAN/03/0592