Cancellation of certificates
The provisions for cancellation of certificates are contained in the VAT Regulations 1995, regulation 206. These regulations establish the circumstances in which certificates may be voluntarily or compulsorily cancelled, the effective date of cancellation, and provides for applications for cancellation to be in writing.
2. Voluntary cancellation
Voluntary cancellation may be allowed provided:
- the farmer applies in writing for cancellation,
- the farmer applies for voluntary registration for VAT under the VAT Act 1994, Schedule 1 or Schedule 3, and
- the farmer has been in the scheme for at least one year.
Note: There is a provision for the Commissioners to agree cancellation if a farmer has been certified for less than a year, but this should only be allowed if the farmer was not registered for VAT before joining the scheme. This is to prevent VAT registered farmers from joining the scheme for a very short period simply to take advantage of the no tax on stocks and assets provision. But if a farmer wants to leave the scheme to register voluntarily for VAT under the VAT Act 1994, Schedule 3 (acquisitions), and you are satisfied that the farmer is making, or intends to make relevant acquisitions from other EU countries, voluntary cancellation must be allowed even if the farmer has been in the scheme for less than one year.
- If voluntary cancellation is to be allowed, follow the guidance in VATAFRS2100.
- If an application is to be refused, follow the guidance in VATAFRS2300.
3. Compulsory cancellation
A certificate must be cancelled if:
- it comes to light that the application to join the scheme contained false information which affects entitlement to certification;
- designated activities cease;
- the farmer has been convicted of any offence in connection with VAT, or makes payment to compound proceedings;
- he is assessed for a penalty under the VAT Act 1994, section 60; or
- the farmer becomes liable to VAT registration in respect of his non-farming activities.
But farmers who become liable to VAT registration can ask for exemption from registration if the taxable supplies giving rise to the liability are zero-rated. If exemption from registration is to be allowed, follow the directions in VATAFRS1900.
- Compulsory cancellation may also be necessary in some cases where the farmer dies, becomes bankrupt or otherwise incapacitated. This is explained in VATAFRS0600.
- VATAFRS2200 explains the procedures to follow in respect of a compulsory cancellation.
4. Cancellation to protect the revenue
Regulation 206 also allows compulsory cancellation of a certificate to protect the revenue. It is not possible to give definitive examples of circumstances where this may be necessary, but, in order to inform policy and increase awareness in this area, VRAP team would be interested to hear of any case where you consider cancellation is necessary to protect the revenue.
5. Leaving the scheme to register for VAT - pre-registration input tax relief
A flat rate farmer who leaves the scheme to register for VAT is not entitled to claim relief for any VAT he incurred on purchases whilst he was a member of the flat rate scheme. This is because he has already been compensated for such VAT by being allowed to charge, and keep, the flat rate addition.