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Whose Business Is it - Caroline Rosen and the case of the correct business owner


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19th September 2013 the vat people

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

The 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

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