In Holy Cow! Ice Cream Company v HMRC [2019] UKFTT 616 (8 October 2019) the FTT found that HMRC did not have the power to apply the flat rate scheme retrospectively.
The company had begun trading in 2016 and registered for VAT in that year. However it had made losses and in August 2017 it had applied to enter the VAT flat rate scheme (FRS) with effect from 1 January 2017. HMRC had granted the application in November 2017 but only with effect from 1 July 2017. This was because HMRC’s guidance stated that backdating is not allowed for VAT periods for which a trader has already calculated its liability because ‘the FRS exists to simplify VAT accounting and record keeping for small businesses’. However HMRC’s guidance also stated that this policy may be disapplied in ‘exceptional circumstances’ such as where ‘the survival of...
