The meaning of ‘registrable’ for VAT purposes

One of my least favourite words is ‘any’, and that is because it seems possible for it to mean ‘all of’ or ‘the slightest proportion of’, and one can imagine that the two could be assumed to apply in the same example.

I am not sure that ‘registrable’ is in that league, but I can still see the temptation to interpret it as meaning ‘must be registered’ as opposed to ‘may be registered’.

That was the issue in Inspired by Service Ltd [2016] UKFTT 812 (TC). The unhappy context of this case is that it had applied for voluntary registration for VAT (on advice) but had assumed (on the same advice) that, despite registering, it would not have to pay VAT on sales until it breached the mandatory threshold.

Now, it is obvious to readers that this was a mistake, and that it should account for VAT on supplies made from the effective registration date. No returns were submitted, and HMRC raised assessments. The appellant believed that natural justice required that HMRC annul the registration entirely, on the basis that the voluntary registration was a plain error based on a misconception (and it had never exceeded the threshold). HMRC said it was not able to. The point proceeded to tribunal, where HMRC won.

The basis for the appeal was VATA 1994 Sch 1 para 13 (3). This says: ‘Where the Commissioners are satisfied that on the day on which a registered person was registered he was not registrable, they may cancel his registration with effect from that day’. Note the fact that the Commissioners are only able to exercise discretion if those conditions are met. But, does the italicised part of this mean: ‘was not required to be registered’, or ‘was not entitled to be registered’? Another way of putting this is whether ‘registrable’ means ‘capable of being registered under the rules’, or ‘under obligation to register under the rules’.

We can only infer this from context. The context is that registration is allowed to those who wish it, if they choose it, even if not required, but only if they qualify by making taxable (or deemed taxable) supplies. In addition to this registration is mandatory in other cases. Thus, ‘registrable’ cannot rationally exclude that voluntary registration scenario, and cannot solely apply where registration is mandatory. I see no doubt on that point, and neither did the tribunal. But one can understand how it was tempting to think otherwise.

This means that once voluntary registration has been validly requested, it can only be reversed (on application) from a current date (assuming the status still applies, of course) so this oversight is not rectifiable.