Mr James Yarlett t/a "Beanies-by-Night" and t/a "J Y Electricals" v Commissioners for Her Majesty's Revenue and Customs

Decision date: 15 April 2011

Neutral citation: [2011] UKFTT 253 (TC)

Overall AI summary confidence: high

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Short overview

This short overview is intended to summarise the case, issues and outcome so far as they are supported by the judgment.

AI confidence in this short overview: high

The appellant, Mr Yarlett, operated J Y Electricals and from late 2005 a reduced-scale restaurant trading as Beanies-by-Night; HMRC aggregated turnover and issued a VAT assessment and a 15% fixed penalty for late registration. The Tribunal found the restaurant was not carried on in partnership with Mrs Wagstaff and that both businesses were sole trader activity, dismissed the appeal against the VAT assessment and upheld the 15% penalty. The Tribunal noted sympathy for the appellant’s financial position and urged HMRC to consider discretionary collection measures.

Ratio decidendi

This summary is intended to identify the ratio decidendi, meaning the legal reasons for deciding and the binding part of the decision.

AI confidence in this ratio decidendi summary: high

From the Tribunal’s findings: (1) the existence of a written agreement and provision of capital by a third party do not alone establish a trading partnership; there must be evidence that both parties agreed to carry on the business together and to share profits and losses. (2) An honest belief or mistake of law about VAT registration does not amount to a “reasonable excuse” to avoid a fixed failure-to-register penalty.

Obiter dicta

This summary is intended to identify obiter dicta, meaning observations made by the way that were not necessary to deciding the case and are not binding.

AI confidence in this obiter dicta summary: medium

The Tribunal indicated that had there been clear evidence that both parties contributed capital, shared profits and losses, and agreed that the partnership structure extended to the restaurant trading, it would have found a partnership. The Tribunal also noted HMRC concessions (starting assessments from a later date and allowing a notional 15% input deduction) as lenient measures it appreciated.

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