Indirect tax news from the past week
European Commission: Guide to the VAT One Stop Shop
The European Commission has published a Guide to the VAT One Stop Shop which provides details concerning VAT registration, returns and payments for the three OSS schemes (union scheme, non-union scheme and import scheme) that will apply in the EU from 1 July 2021. Under these schemes, online sellers will be able to register in one EU Member State to declare and pay VAT on all distance sales of goods and cross-border supplies of services to EU customers. Existing thresholds for distance sales of goods will be abolished and replaced by an EU-wide €10,000 threshold for distance sales of goods and telecoms, broadcasting and electronic services. The introduction of the Import One Stop Shop (IOSS) for distance sales of low value goods imported from non-EU countries will accompany the removal of the low value consignment threshold. The new guide complements other extensive guidance that has been published by the Commission. Some EU Member States, including Belgium, the Netherlands, and Denmark, have launched portals allowing businesses to register under the schemes. (Contact: Ed Hurley).
Build-a-Bear: how to treat a teddy bear’s heart – UT
How can you tell if a plastic heart, which gives a cuddly toy a “realistic pitter-patter” heartbeat, is designed for a bear (and therefore subject to duty at 4.7%) or a doll (duty free)? In Build-a-Bear, the Upper Tribunal has considered how to classify both hearts and other accessories (such as shoes, clothing, and wigs) which could be used with either. It decided that where accessories were designed principally for bears or for dolls, then Note 3 to Chapter 95 of the Combined Nomenclature classified them accordingly. Therefore, wigs which had slits and loops to fit over a bear’s ears were principally suitable for teddy bears and were subject to duty. However, bears and dolls both need hearts, and in that case Note 3 did not help. Classification of the hearts depended on the existence of a subheading in the Combined Nomenclature for “parts and accessories” of dolls but the absence of any equivalent for bears, which meant that they should be classified as duty-free. (Contact: Caroline Barraclough).
Consultation: notification of uncertain tax treatments
HMRC have published a second consultation on the Notification of Uncertain Tax Treatments (NUTT), which addresses comments provided in response to an initial consultation last year. HMRC remain committed to a NUTT regime, which is now scheduled for April 2022. The revised regime will not include customs and excise duties or Insurance Premium Tax, leaving VAT as the only indirect tax within NUTT’s scope. HMRC are seeking views on possible changes to the proposed scheme. These include a revised test of how to determine whether a VAT treatment is uncertain, which would require businesses to consider not just HMRC’s known position, but also industry practice, what has been done in the past, and any professional advice received. The threshold for notifications could be increased to £5m, but without reference to the particular features of indirect taxes. Responses to the second consultation should be submitted by 1 June 2021. (Contact: David Walters).
Postponed import VAT accounting now available for s.33 bodies
HMRC’s guidance on the scope of postponed import VAT accounting (PIVA) has been amended. Previously, HMRC considered that it was necessary for there to be at least a possibility of partial business use of imported goods in order to apply PIVA. Under the revised guidance, bodies which are not in business but which are allowed to recover VAT through s.33 VATA 1994 (e.g. local authorities, water authorities, and Transport for London) can account for import VAT through their VAT returns. The guidance also confirms that a statement on a customs declaration that import VAT will be accounted for through PIVA is irrevocable. (Contact: Nick Comer).