Whose Business Is it - Caroline Rosen and the case of the correct business owner
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19th September 2013 the vat
It is surprisingly common for clients to refer to a VAT
registered business as their business when in fact they may be in
partnership with another person (often their spouse) or may in fact not
be the VAT registered person. This can cause a whole host of
complications from a VAT view point as is highlighted in the recent
case of Caroline Rosen.
The appellant had been assessed for VAT due on supplies made
by a light haulage business. Although she was the VAT registered person
she actually was an aerobics instructor and the haulage business was
run by her husband. The appeal originally was made against a £14K
assessment on the basis that it was impossible for the business to have
made the level of supplies that HMRC believed had been made. However,
during the course of the appeal Mr Rosen sadly died and Mrs Rosen
sought to have the grounds for appeal amended on the basis that she was
not the taxable person, her husband was, and thus she should not suffer
an assessment for VAT.
The argument was presented that Mr Rosen had used her name and
signature to obtain the registration as he had previously been made
bankrupt and had suffered a previous messy divorce. The VAT inspector
had also noted that in reality the business was operated by Mr Rosen.
However, Mrs Rosen had responded in writing to various matters
concerning the business and referred to it as her business. Having
considered the substantial and often contradictory evidence presented
the tribunal chairman found that Mr Rosen had acted as Mrs Rosenís
agent, perhaps on an undisclosed basis. This being the case she was the
correct person to assess for VAT and the assessment was upheld with a
minor adjustment for the amount of VAT due.
This case makes it clear that sole proprietors and partners need to be
very careful when registering for VAT to ensure that any one that signs
documents such as VAT 1's, letters to HMRC etc, clearly state the
capacity that they are acting in, otherwise they may end up with an
unexpected VAT debt. Equally importantly it is common for individuals
to act on the behalf of another and create an agency relationship which
may also have unexpected VAT consequences for both parties.
About the Author
VAT People are leading VAT and Customs Duty
consultants based in the
North West of England. We work with a wide range of businesses
throughout the UK as well as assisting our accountancy colleagues to
unravel the thorny VAT issues for their clients. We are one of the UK's
largest and most comprehensive sources of VAT and Customs advice, our
consultancy team having over 140
years of experience in VAT and Customs
gained in either HMRC or a Big 4 accountancy practice environment.
Call us on our VAT helpline 0800 077 4604 to discuss. All initial discussions are free with no-obligation.
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Article Published/Sorted/Amended on Scopulus 2013-10-03 12:32:23 in Tax Articles