Indirect tax news from the past week
11/11/2024
Midlands Partnership University NHS Foundation Trust: COS VAT refund claim – UT
Midlands Partnership University NHS Foundation Trust (the Trust) was commissioned by local authorities to provide certain, free at the point of use, health services to the public. HMRC considered that these were supplies by way of business, and that the provision of sexual health and health visiting services were exempt supplies, and that infection prevention and control services were standard-rated supplies. Accordingly, the Trust was not able to claim a refund of VAT under s. 41, VATA 1994, under which public bodies are able to claim VAT incurred in relation to non-business activities (the Contracted-Out Services VAT refund mechanism) and should instead claim VAT under the normal VAT recovery rules, with the implication being that there would be a VAT recovery restriction because some of the supplies were exempt from VAT. The Trust sought judicial review of HMRC’s decision. The Upper Tribunal has rejected the Trust’s grounds for judicial review. The UT considered that the Trust’s services were supplied for consideration, namely the payments made by the local authorities for the services provided. The UT also considered that the Trust’s activities were an economic activity. Accordingly, the Trust was not able to claim a VAT refund under s. 41. The Trust had also argued that, even if its services were prima facie within the scope of VAT, the provision of the services was a non-business activity because the Trust was not a ‘taxable person’, on the basis that it was acting as a public authority under a special legal regime. The UT did not agree, and concluded that the Trust was not acting as a public authority in this context. The Trust’s judicial review application was dismissed. (Contact: Phil Simmons)
Single Trade Window – implementation paused
James Murray, the Exchequer Secretary to the Treasury, has announced that the government is pausing delivery of the Single Trade Window. The Single Trade Window was intended to be a single digital gateway for traders and intermediaries to meet their border obligations, bringing together border services and other features, such as applications for licences and authorisations. The government is considering its future plans for the border, including the role of the Single Trade Window. There will be an update as part of the next phase of the Spending Review, in late Spring 2025. (Contact: Sam Kiely)
VAT in the Digital Age – ECOFIN reaches agreement
On 5 November 2024, the EU’s Economic and Financial Affairs Council (ECOFIN) reached agreement on the EU’s VAT in the Digital Age (ViDA) package. The ViDA package is intended to update the EU VAT system to take account of technological advances, address the challenges of the digital economy, and be more resilient against VAT fraud. The ViDA package includes three pillars. Firstly, digital reporting requirements, with new rules for digital reporting based on electronic invoicing. Secondly, a new VAT regime for platform economy operators in the short-term accommodation and passenger transport sectors, who will be responsible for collecting and remitting VAT (the ‘deemed supplier’ model). And thirdly, single VAT registration, to reduce the need for taxpayers to VAT register in each EU member state in which they do business. The European Commission originally released the ViDA proposals in December 2022, and discussions between EU member states have been taking place since then. The most recent changes made to the package were to alleviate the administrative burden on small- and medium-sized businesses from the scope of the regime for platform economy operators, and to postpone the application date for the rules on the platform economy and single VAT registration. For more information on the package, including the key changes and timelines, see tax@hand. (Contacts: e-invoicing: Demian de Souza; marketplaces: Abi Briggs)
Dbriefs webcast
On 12 November at 12.00, the UK Tax Update – November webcast will be hosted by Tim Waterhouse. Our panel will discuss the latest UK tax developments, with updates on news in corporate, employment and indirect tax.