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VAT EDR – effective date of registration

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VAT EDR explained

The VAT EDR for a business is the effective date of registration EDR for Value Added Tax (VAT).

A business making taxable supplies can apply to be registered from any time.  There are a number of instances, such as exceeding the VAT registration threshold, where a business is required to be registered for VAT.  The date from which a VAT registration commences is the VAT EDR.

Tribunal decision concerning VAT EDR

In the case of Sammy Garden Ltd (SGL) the facts included:

  • that it was incorporated on 9 March 2021. On the same day, a Mr Tomczak became a director of SGL and transferred his landscape gardening business to it as a going concern.
  • On 20 May 2021, SGL submitted an application for VAT registration 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 VAT registration application gave a VAT EDR of 9 March 2021.
  • SGL’s VAT registration form included a number of invoices issued by SGL dated in April and May 2021 which showed a separate charge for VAT.
  • On 27 July 2021, HMRC notified SGL of its VAT Registration Number (VRN) and its VAT 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, being the VAT EDR, and 27 July 2021 beingthe day that SGL had received its VAT Registration Number (VRN).
  • HMRC raised an assessment, increasing the output VAT due from £7,760 to £29,344.

SGL Argued that:

  • 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 VAT 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 found that:

  • There was nothing in the hearing bundle that constituted a request from SGL to change the VAT 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 business as a going concern on 9 March 2021.
  • HMRC acted reasonably in accepting the VAT 1 form at face value, providing SGL with an VAT 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 VAT EDR but had not done so.
  • For the reasons above, SGL was registered for VAT with a VAT 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 VAT EDR and the receipt of the VRN.

The appeal was dismissed.

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