Flat rate VAT

A small business client applied for VAT and the flat rate scheme successfully after incorporation. It transpired that the small business didn't trade for the first year and therefore submitted nil VAT retuns each quarter. After 12 months the company started billing and expected that the 1% flat rate discount to start at that point, however, the VAT office disagreed. Is the VAT office right? Could the small business appeal? Surely, because they haven't traded the 12 months can start at the time of the first invoice?

Thanks for your help