The taxpayer was defeated over a penalty due for late registration but was aided by the application of HMRC’s secret ‘liable no longer liable’ concession.

The FTT case of Stanley Chmiel (TC07112) was a routine win for HMRC. His company Kudos Building and Electrical Services Ltd was late registering for VAT, and HMRC assessed the company for belated tax of £12,143.

HMRC decided the late registration was due to “deliberate not concealed behaviour” so the officer also issued a 35% penalty. This penalty became the subject of a personal liability notice against the director (Chmiel) when the company failed to pay the tax or penalty. HMRC can do this in the case of deliberate behaviour, using powers given by para 1, Sch 41, FA 2008. Chmiel’s appeal against the penalty imposed on him personally, failed.

Late registration period

However, the most interesting issue about this case is the way that HMRC applied its ‘liable no longer liable’ policy in relation to the late registration period:

• The company exceeded the compulsory VAT threshold on 31 January 2012, so was liable to be VAT registered from 1 March 2012. So far, so good.
• The company’s rolling 12-month turnover thereafter continued to be above the deregistration threshold until the year ended 31 August 2013 (£79,000 at the time and turnover was £78,319). The VAT deregistration threshold is £2,000 less than the registration threshold.
• The turnover then exceeded the deregistration threshold again for the final time in the year to 30 September 2013 (£80,289), but subsequently was below that threshold.
• HMRC treated the late registration period as being from 1 March 2012 to 31 July 2013, even though the company continued to trade until March 2016.

Liable no longer liable

HMRC’s liable no longer liable policy recognises the situation of a business registering late for VAT, but its turnover was below the deregistration threshold for part of the late period.