Indirect tax news from the past week
11/12/2023
British Telecommunications plc: historical bad debt relief – Court of Appeal
Deficiencies in the VAT bad debt relief (BDR) scheme prevented BT from claiming VAT of £65m between 1978 and 1989, under the ‘Old BDR Scheme’. Since 2009, it has been pursuing a historical BDR claim by two routes, both of which the Court of Appeal has now rejected. In September 2023, the CA refused permission for BT to pursue an appeal which had originally been made to the First-tier Tribunal (seeking to justify a claim through s.80 VATA 1994 and a ‘conforming interpretation’ which corrected the Old BDR Scheme). The CA has now also struck out BT’s High Court claim for restitution. In the Court’s judgment, Parliament must have intended the Old BDR Scheme to exclude common law remedies such as restitution. Otherwise, BT would have been able to avoid detailed regulations about the form and timing of BDR claims by pursuing a High Court claim, rather than applying the Old BDR Scheme. Even if restitution had been available alongside the Old BDR Scheme, the CA concluded that HMRC had not been unjustly enriched. The purpose of the law of unjust enrichment is to correct ‘normatively defective’ transfers of value. But BT had always accounted for VAT at the correct time, and was only out of pocket because it had failed to make a BDR claim within the requisite period. On that basis, any unjust enrichment action could not succeed, and the CA confirmed the High Court’s decision to strike out BT’s claim. (Contact: Adam Richardson)
Vision Dispensing Ltd: VAT exemption for contact lens dispensing services – FTT
High street opticians frequently allocate part of the price of contact lenses to VAT-exempt dispensing services, even for existing customers who do not need a new eye test. Vision Direct, an online contact lens supplier, similarly split its sales between Vision Direct BV (lenses +VAT, 82%) and Vision Dispensing Ltd (VDL) (exempt dispensing services, 18%). The First-tier Tribunal has ruled that VDL’s services were not exempt from VAT. VDL provided advice and recommendations to customers via helplines, livechats, and instructional videos on the Vision Direct website. The FTT accepted that generic clinical advice delivered by a website could be exempt healthcare, but found that the website belonged to Vision Direct BV, not to VDL. In any event, the website was a resource that was freely available to anyone, and the FTT did not accept that VDL was charging Vision Direct customers for access. VDL’s description of its services as a prescription validation service was “unrealistic”. VDL answered customer enquiries, sent out reminders, and operated the Vision Direct warehouse in York. The only element which might qualify as care and therefore VAT exempt was directing clinical enquiries to the website, but that happened with only about 2% of customers. The FTT also found that VDL’s staff were not supervised by a registered optician. Although they had access to professional opticians if they needed clinical advice, the “authoritative, intrusive (if not constant) element of checking, knowing for yourself what is going on”, which the FTT considered to be an essential feature of supervision, was absent. VDL was not providing exempt healthcare, and its appeal was dismissed. (Contact: Alistair Lord)
Customs simplification measures
The government has published proposals for customs simplification measures. Firstly, following a consultation, the government intends to proceed with introducing a voluntary standard for customs intermediaries. From Spring 2024, the government, in collaboration with industry, will work with the British Standards Institution to develop a standard suitable for certification. Secondly, following a call for evidence on the future of customs declarations, the government has confirmed that it intends to simplify customs declarations for imports and exports. There will be ongoing consultation with stakeholders regarding the timeline for implementing changes and on the wider role for technology. Thirdly, following a call for evidence on temporary admission, the government has identified a number of areas for potential policy change, with a view to making the temporary admission procedure more accessible, and will consult further. Other simplification proposals include: modernising customs and excise authorisation processes; allowing more traders to access customs procedures without the need for financial guarantees; and a number of improvements to the transit process. (Contact: Jeffrie Mann)
OECD report on greenhouse gas emission pricing
The OECD has published the latest edition of its annual report on Effective Carbon Rates 2023: Pricing Greenhouse Gas Emissions through Taxes and Emissions Trading. The report looks at the state of carbon pricing, encompassing fuel excise taxes, carbon taxes, and emissions trading systems. The analysis covers 72 countries, collectively emitting approximately 80% of global greenhouse gas (GHG) emissions in 2021. The OECD notes that nearly 60% of the approximately 40 billion tonnes of GHG emissions were unpriced in the countries covered in the report, down from about 70% of unpriced GHG emissions in 2018, but with significant variation of coverage, prices, and pricing instruments across sectors and countries. In its country summary for the UK, the OECD states that the UK “priced about 74% of its carbon emissions from energy use and about 59% were priced at an [effective carbon rate] above EUR 60 per tonne of CO2”. (Contact: Zoe Hawes)
This week’s CJEU calendar
On 14 December, Advocate General opinions will be delivered in MAX7 Design, on a requirement in Hungary for businesses to lodge a tax guarantee, and in Slovenské Energetické Strojárne, on the appeals process for EU VAT refund claims.
EMEA Dbriefs webcasts
The next EMEA Dbriefs Tax webcast is on Tuesday 12 December 2023 at 12.00. December’s UK Tax Monthly Update will be hosted by Andrew Clarke, and our panel will provide an update on the latest news in corporate, employment and indirect tax.