Indirect tax news from the past week
RCB 1(2022): VAT recovery on electric vehicle charging
HMRC have updated Notice 700/64 to address the recovery of VAT on electric vehicle (EV) charging. The new guidance substantially reflects HMRC’s position as set out in RCB 7(2021) last May. For example, businesses can potentially recover VAT on electricity used by employees to charge their EVs at work, to the extent that they can provide evidence of business mileage; but VAT recovery is not permitted if an employee charges their EV at home, even if it is used for work. The Notice now confirms that businesses will be able to treat VAT on the use of public charging points by their employees as input tax. In RCB 1(2022), HMRC have also stated that they are reviewing the evidence that should be retained by businesses which reimburse employees for the actual cost of electricity used in charging an EV for business purposes, and are considering other simplification measures that may reduce administrative burdens in terms of accounting for VAT on private use. Further guidance will follow on the conclusion of the review. (Contact: Tom Shaw).
RCB 15(2021): UK VAT refund claims by overseas businesses
Overseas businesses are required to provide a certificate of status together with claims for repayment of UK VAT. HMRC are aware that businesses in some countries are continuing to experience difficulties in obtaining the required certificates, due to measures taken in response to COVID-19. In RCB 15(2021) HMRC have confirmed that they will continue to accept late certificates where the delay has been caused by a one-off, unavoidable event, provided that the claim has been submitted in time without the certificate, that businesses can show that they requested a certificate within a reasonable time, and that they forward the certificate to HMRC within 30 days of receipt. These conditions replace the easement announced in RCB 10(2021) last July, in which overseas businesses were permitted an additional six months (until 31 December 2021) to provide certificates. (Contact: Alistair Lord).
Hotel La Tour: input tax recovery allowed on costs of hotel sale – FTT
In order to fund the development of a new £30m hotel in Milton Keynes, Hotel La Tour Ltd decided to sell its existing hotel in Birmingham. The deal completed in 2017, and involved the sale of shares in a subsidiary which owned the existing hotel to Dalata UK Ltd for £4.8m, as well as an undertaking by Dalata that it would put the subsidiary in funds to repay a group loan of £12.1m from HLT and a bank loan of £13.5m. HMRC denied input tax recovery of £76k on marketing and legal costs on the basis that they related to the exempt share sale. However, the First-Tier Tribunal has allowed HLT’s appeal. Applying Frank Smart, it considered that the purpose of the transaction was to fund HLT’s taxable activities (i.e. developing and operating the new hotel in Milton Keynes). The FTT considered that where services were used for fundraising, VAT recovery might be possible even if the services related to exempt share sales, provided that the purpose of the fundraising was to fund taxable activity, the funds were so used, and the services were cost components of that taxable activity. The FTT decided that HLT satisfied those tests, and should be entitled to VAT recovery. (Contact: Matt Davies).
Cantina Levorato: delay between making and notifying assessments – FTT
In 2009-10 Cantina Levorato SRL dispatched 43 duty-suspended consignments from Dolo in Italy to an excise warehouse in Liverpool. However, 40 of the consignments never made it, leaving CL exposed to an excise duty assessment of £1.3m. HMRC created an assessment in September 2012, but they sent it to the wrong address in Italy. The First-tier Tribunal has ruled that CL was not notified of the assessment until a copy was provided to CL’s lawyers in 2017. Like VAT, time limits for excise duty refer to the making of an assessment rather than when it is notified. However, the FTT considered that, in order to satisfy the principle of legal certainty, an assessment must be notified within a reasonable time of it being made (there must be a “proximity or nexus”). Notifying an assessment more than four years after it was made breached this requirement, and the assessment was therefore time-barred. The FTT also commented that CL had a legitimate expectation that HMRC should follow their own guidance (for excise duty, as for VAT) and apply time limits by reference to when assessments were notified, not when they were made. (Contact: David Walters).