VATREG21300 - Voluntary registration: making taxable supplies below the threshold: application for retrospective voluntary registration
The provision for traders to negotiate an earlier date is contained in the VAT Act 1994, Schedule 1, 9.
Our policy on retrospective voluntary registrations stems from our interpretation of this paragraph, and has been confirmed by the Solicitor’s Office. In our view paragraph 9 is to be read as a whole. Therefore the condition, ‘or from such earlier date as may be agreed between them’, would only operate if the trader who is seeking to obtain an earlier date is both
- not liable to be registered, and
- not already so registered.
This means that a trader who is already registered can not apply for retrospection. The time at which he was entitled to negotiate an earlier date was at initial application and, once registered, his entitlement was extinguished. Similarly, a trader who has deregistered can not apply for retrospection. In our opinion, he can not ignore the period of his previous registration because it was during this period that his entitlement to be registered from an earlier date was extinguished.
Our policy is that this retrospection is restricted to four years from the date the application is received.
However, the proper exercise of the power to allow retrospection means that we should be prepared to recognise there may be exceptional circumstances where the four year restriction should be set aside. In principle, such cases are likely to involve compassionate circumstances, or the survival of the business, but we have not identified to date any case where such circumstances justify a departure from the normal policy. If you think that that there are such circumstances, the case should be sent via a Technical Advice Request with a clearly outlined recommendation.
The following are examples of the different types of request for retrospective registration and the recommended course of action:
| Types of request for retrospective registration | Recommended course of action |
|---|---|
| If a trader applies now to be registered for the first time with an EDR earlier than the current date | you may allow registration no further back than four years from the date the application is received, subject to the trader having an entitlement to registration for the whole of that period. |
| If a trader who is registered requests backdating of their EDR | you should not normally allow retrospective registration to an earlier date. |
| If a trader who has deregistered applies to re-register for a period prior to or up to their original EDR | you should not allow registration for this earlier period. |
| If a trader who\n- has not been registered before, and\n- is currently trading below the threshold\nwishes to register for an isolated past period | provided an entitlement to registration existed from the earlier date, and throughout the period requested, you can agree to registration from that date.\nThe date must be no more than four years prior to the date the application is received, but the EDC can be no earlier than the current date.\nThere is no provision for retrospective voluntary deregistration. |
| If a trader who has traded, but who has not previously been registered, has now ceased to make taxable supplies | you should not allow registration because there is no longer any entitlement to be registered. |
| If a trader who\n- has been registered but\n- is not currently registered\napplies to have an EDR prior to their original EDR. | you can only grant registration from a current date back to the date of EDC if, no more than four years from the date the application is received, the trader had an entitlement to registration for the whole of this period.\nThe date can not be extended back any further because there would be two registrations on file for the same trader at the same time. |
If a trader requested an earlier date at the time of registration and was not granted it, you should consider the reasons why his request was turned down. If:
- he could not show that he was entitled to registration for the earlier date, or
- he had insufficient records to show a continued entitlement to registration
then we do not have to backdate. However, if the request was not acted upon due to Departmental error or omission - for example, it was simply overlooked - we must consider his request again and backdate if appropriate.
However, in the case of Gray [2000] STC 880 the High Court held that, the only information which the Commissioners could or should act upon was the information which was available to them at that time.