VAT appeal time limits did not breach EU law

In Hampton George Hewitt v HMRC [2021] UKUT 0231, the Upper Tribunal (UT) dismissed the taxpayer's late appeal against HMRC for the cancellation of his farmer's flat-rate certificate for VAT. The EU's 'principle of effectiveness' was found not to require anything more than the existing 30-day appeal time.

• Mr Hewitt is a farmer who was granted a certificate for the Farmer's VAT flat rate scheme in 2004.
• HMRC cancelled his certificate in 2012, as the amount Mr Hewitt received from the scheme significantly exceeded what he would have claimed in input VAT.
• Mr Hewitt replied to HMRC noting his disappointment but accepting the decision. He did not take advantage of the option to Appeal or seek a Statutory Review, as set out by HMRC. The time limit for appeal was 30 days. 
• In the same year, HMRC cancelled the certificate of another farmer on the same basis. They appealed and the case was referred to the CJEU by the UT.
  • The CJEU held that the EU Principle VAT Directive must be interpreted as having an exhaustive list of reasons why a farmer can be excluded from the scheme.
  • Claiming much more than they would receive in input VAT is not included on the exhaustive list and therefore is not a reason to exclude a farmer from the scheme.
  • The CJEU held that the EU Principle VAT Directive had not been correctly transposed into UK law.
• In light of this decision, Mr Hewitt's accountants wrote to HMRC requesting that the certificate be reinstated from the original date in 2012.
• HMRC refused to either reinstate the certificate from 2012 or from the current date (2018), again on the basis that Mr Hewitt received too much from the scheme. HMRC also stated that there could be no review of the original decision as Mr Hewitt had no Reasonable excuse for not using the 30 days available to him at the date of the decision in 2012.
• On appeal to the First Tier Tribunal, Mr Hewitt requested permission to bring a Late appeal. This was on the basis that he could not have known that the UK VAT legislation did not properly transpose the EU Principle VAT Directive.
• The FTT found that the delay in appealing was serious and significant and Mr Hewitt had no reason for appealing within the 30-day time limit. The appeal was dismissed.

Mr Hewitt appealed on the basis that the FTT had erred in law by not giving him effective remedy against his breach of EU rights. This is the EU law principle of effectiveness.

• All parties agreed that the EU principle remained a retained general principle of EU law within UK legislation as the proceedings had started before the withdrawal agreement came into force.
• The UT found that the principle of effectiveness was not hindered by domestic time limits, provided that they were reasonable. 
  • Those time limits did not have to be deferred until after the CJEU decision establishing an EU right.
  • They also could not be held open indefinitely until a potential claimant became aware of their rights under EU law.
• The UT proceeded on the basis that the cancellation of the certificate was a breach of an EU right.
• The UT found that the cancellation was immediate and had an impact on Mr Hewitt's business straight away. 30 days was, therefore, a reasonable period of time in which to appeal the decision or seek a review. 
• The UT held that Mr Hewitt did have an effective remedy but chose not to use it. The appeal was dismissed. 

Useful guides on this topic

 Flat rate scheme: Farmers
What is the agricultural flat rate scheme? Who can use it? What are the conditions? What is the benefit? What about non-farming income? 

How to appeal an HMRC decision
Disagree with an HMRC decision? How to appeal, what type of decision can you appeal and what are your different options when you disagree with HMRC? What are the key steps in making an appeal?

Appeals: Late
When can you make a late tax appeal? What conditions must be met?

Grounds for Appeal: Reasonable excuse
What is considered to be a 'reasonable excuse' when a taxpayer makes an appeal against a tax compliance failure?

External link

Hampton George Hewitt v HMRC [2021] UKUT 0231