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Is HMRC applying the law correctly in relation to certain flat rate scheme categories?
KEY POINTS
- Under the VAT flat rate scheme (FRS) a taxpayer is responsible for choosing their own category.
- HMRC will not challenge a taxpayer’s choice of FRS category if it is reasonable – but what constitutes ‘reasonable’?
- The First-tier Tribunal cases provide examples of HMRC challenging the taxpayer’s category and losing.
- Is it time to change how HMRC determine which FRS category a taxpayer falls into?
A couple of days ago I wrote a reader query reply for Taxation and included some words of wisdom about the flat rate scheme (FRS). Included in my initial draft was the sentence: ‘For UK sales Lawrence’s client will pay FRS tax based on the 12% rate that applies to health and safety consultants under the category for other services not listed elsewhere.’
However when...
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