Any business making taxable supplies where the resulting taxable turnover in any 12 month period exceeds the VAT registration threshold (currently £85,000 at the time of writing, January 2020) will be liable to register for UK VAT.

In the case of Dean Jason Butler, HMRC stated that he was liable to register for UK VAT with effect from 1 June 2008 and applied a penalty with respect to failure to notify HMRC of this fact. Mr Butler, a decorator, carpenter and project manager, appealed against this decision to the First-Tier Tribunal.  HMRC contacted Mr Butler in 2011 requesting details regarding his business activities. From the information provided, HMRC determined he was liable to register for UK in accordance with the VAT registration thresholds in place at that time and imposed a penalty based on a percentage of potential lost revenue.

An appeal against this decision was lodged on the grounds that the project management business ran by Mr Butler was done so in partnership with his wife. Were this the case, there would be an effect on the date Mr Butler was liable to register for VAT and the VAT due to HMRC, aswell as any penalty calculation. Mr Butler's wife provided assistance to Mr Butler in relation to jobs that required work beyond decorating and carpentry. This mainly involved the installation of new bathrooms-kitchens and Mrs Butler was involved in obtaining sub-contractors and preparing quotations which amounted to approximately 25- of the work undertaken by the project management business. 

However, as the opportunities for project management work arose from Mr Butlers activities as a decorator and carpenter, who in turn dealt with the client and sub-contractors on site, coupled with the fact that invoices for work performed by the project management business were issued in the name ‘D Butler' meant that the Tribunal concluded that there was a lack of evidence to classify the project management business as a partnership.

As a result Mr Butlers appeal against HMRCs decision was rejected. To clarify if a business you are involved in is liable to register for UK VAT, and to discuss what the implications of this would be for your business, please call our free VAT helpline today.

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