In Sammy Garden Ltd v HMRC [2025] TC09443, the First Tier Tribunal (FTT) found that a company was liable to account for output VAT from its effective date of registration, not the date that it learned of its VAT registration which was nearly four months later.
Sammy Garden Ltd (SGL) was Incorporated on 9 March 2021. On the same day, Mr Tomczak became a director of SGL and transferred his landscape gardening business to it.
- On 20 May 2021, SGL submitted a VAT registration form (form VAT1) to HMRC, indicating that the reason for registering was that SGL had 'taken over a business as a going concern' or had 'changed or was about to change the legal status of a VAT registered business'.
- The VAT1 gave the Effective Date of Registration (EDR) of 9 March 2021.
- SGL's VAT registration form included several Invoices issued by SGL, seven of which were dated in April and May 2021 and showed a separate charge for VAT.
- On 27 July 2021, HMRC notified SGL of its VAT Registration Number (VRN) and its EDR of 9 March 2021.
- The only explanation provided by HMRC for this two-month delay was a lack of resources.
- SGL submitted its first VAT return for the period from 9 March 2021 to 31 August 2021, showing a repayment due.
- HMRC undertook a check of the VAT repayment claim and found that SGL had not declared output VAT on sales made between 9 March 2021 (the EDR) and 27 July 2021 (the day that SGL had received its VRN).
- HMRC raised an assessment, increasing the output VAT due from £7,760 to £29,344.
SGL Appealed to the First Tier Tribunal (FTT), arguing:
- It could not include VAT on its invoices until it had received its VRN.
- In support of this assertion, SGL relied on paragraph 2 of Schedule 41 to the Finance Act 2008, which provides that a Penalty is payable by anyone who issues an invoice including VAT before they are VAT registered.
- There was no statutory requirement on SGL to reissue invoices including VAT to its customers where those invoices had been issued without VAT after the EDR but before it received its VRN.
- SGL provided quotes before it obtained work, so was in a difficult situation from the EDR until receiving the VRN because SGL could not quote for VAT.
- The tribunal should decide the case on a human level and exercise its discretion to disapply the legislation or amend the EDR in the application.
The FTT found that:
- There was nothing in the hearing bundle that constituted a request from SGL to change the EDR.
- By putting a cross in box 5 on the VAT1 form, SGL stated that it was registrable for VAT on the grounds that it took over a going concern on 9 March 2021.
- HMRC acted reasonably in accepting the VAT 1 form at face value, providing SGL with an EDR of 9 March 2021 as requested by it in the VAT1 form.
- SGL had plenty of opportunity over three years to request an amendment to the EDR but had not done so.
- For the reasons above, SGL was registered for VAT with an EDR of 9 March 2021.
- SGL had a statutory obligation to account for and pay VAT on the taxable supplies it made from 9 March 2021 onwards.
- SGL was correct in that it could not issue VAT invoices to customers before receiving a VRN, as it could be subject to a penalty for doing so. However, statutory liability to account for and pay VAT on supplies was not dependent on SGL issuing invoices to its customers that separately charge for VAT.
- HMRC’s guidance in section 5.1 of Notice 700/1 offers a pragmatic solution to the difficulty correctly identified by SGL where there is a delay between the EDR and receipt of the VRN.
- HMRC were correct to assess for output VAT on invoices issued between the EDR and the receipt of the VRN.
The appeal was dismissed.
Useful guides on this topic
Registering for VAT
When should a business register for and charge VAT? What are the VAT registration thresholds? What penalties might HMRC issue for late notification of registration? When do you need to file a VAT return?
Input VAT: What constitutes a valid claim (& VAT invoice)?
What is Input VAT? Who can claim it? What is needed for a valid claim? What needs to be included on a VAT invoice and can you make a claim without one?
Penalties (VAT)
When do penalties apply for VAT? What penalties are charged and how can they be mitigated?
How to start a company
How do you go about creating a company? What do you need to do start a company? A practical guide on how to form (incorporate) a private limited company covering the key points that you need to consider.
Is voluntary VAT registration worthwhile?
When can a business voluntarily register for VAT? When would it be beneficial to voluntarily register?
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