In the case of McBean v HMRC [2026] UKFTT 799 (TC), the FTT has dismissed an appeal against compulsory VAT registration and the associated late notification penalty.
VAT – appeal against registration and penalty for failure to notify of liability to register – turnover exceeded the threshold – no reasonable excuse – appeal dismissed
The Appellant, who installed gas boilers, had previously been voluntarily registered for VAT, but had deregistered when he had realised this resulted in his business being uncompetitive. At a later date the VAT-registration threshold was breached, but the Appellant failed to register and traded without accounting for VAT for a number of years. The Appellant made an initial argument that he had never been properly deregistered and thus the assessment of outstanding VAT was limited to four years rather than 20 years as in the event of a failure to notify of liability to registration, but this was not pursued at the hearing as the clear evidence was that he had been told by HMRC that he was deregistered and that he considered himself deregistered. It was not possible for the Appellant to appeal the assessed amount of VAT as he had failed to file VAT returns for the relevant periods, however it would be possible to challenge the calculation of the VAT in relation to its basis for the penalty. An argument was therefore raised that the penalty calculation was incorrect because some of his outputs were actually lower and zero-rated rather than standard rated, but this was not pursued as it was only raised at the hearing itself and the Appellant did not provide the necessary evidence. An argument that HMRC had given him “incorrect advice” was also not pursued.
The FTT confirmed that the VAT registration limit had been breached, the assessed VAT was correct and that the penalty had been correctly calculated, thus the appeal hinged on whether the Appellant had a “reasonable excuse”. The Appellant argued that he had misunderstood the test and believed that it was based on net profit rather than turnover. Applying Perrin, the FTT concluded that:
“we reject the Appellant’s case on reasonable excuse. The Appellant did know that there was a requirement to register for VAT, and this is not a case of a taxpayer being ignorant of some legal requirement. As to the fact that the Appellant appears to have misunderstood the nature of the statutory test for registration for VAT, that is not a reasonable excuse. In our judgment, it is not objectively reasonable for the Appellant to have misunderstood the threshold for register for VAT as relating to profit, rather than value of his taxable sales or turnover, and we find it highly surprising that he did so. He did not give any evidence of seeking to inform himself of the correct position, whether by consulting with an accountant, researching online or otherwise. In short, there was no reasonable excuse for his failure to notify his liability to register.”
A complaint was also raised that HMRC had not “suspended” the penalty. However, the FTT noted that “the exercise of any discretion that HMRC has about the collection of or suspension of the Penalty is not subject to an appeal to this Tribunal. Schedule 41 para 17 limits the Tribunal’s jurisdiction to an appeal against a decision that a penalty is payable and an appeal against the amount of a penalty.”
https://caselaw.nationalarchives.gov.uk/ukftt/tc/2026/799
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