Weekly VAT News

Cambria Automobiles Ltd & Anr: settlement of historical car claims – UT

In 2003, Cambria Automobiles submitted a claim for margin scheme VAT overpaid on sales of demonstrator cars (an “Italian Republic” claim) between 1973 and 1996. HMRC agreed to pay Cambria’s claim in 2006. This involved an agreement under s.85 VATA 1994 to dispose of a protective appeal submitted by Cambria, which stated that HMRC would pay £1.4m “in settlement of [Cambria’s] claim for overpaid VAT”. The Upper Tribunal has now ruled that this agreement extended to all overpayments in relation to the vehicles supplied by Cambria during the relevant periods. Other car dealers, whose claims had not been finalised, subsequently managed to negotiate additional payments on the basis that the “Italian tables” used to calculate the claims understated how much margin scheme VAT car dealers had paid. However, a claim submitted by Cambria in 2009 for its payments to be uplifted on the same basis effectively breached the terms of the s.85 agreement (which a “reasonable person” would have interpreted as a final settlement of Cambria's claim). Consequently, it would be an abuse of process to allow Cambria to appeal HMRC’s rejection of the 2009 claim. The Upper Tribunal criticised the FTT for setting out the approach to contractual interpretation, but then failing to apply it. But having set aside the FTT’s judgment, it reached the same conclusion and dismissed Cambria’s appeal. (Contact: Oliver Jarratt)

Octagon Green Solutions Ltd: landfill tax late appeal - UT

On 9 September 2016, HMRC assessed Octagon for VAT of £12m and landfill tax of £57m in the course of a criminal investigation into the operation of a landfill site. The assessments were issued to avoid falling foul of the assessment time limits and contained the usual notice of the right to appeal or request an HMRC review within 30 days. HMRC also stated that they would not enforce the VAT assessment until the conclusion of the criminal proceedings, when they would contact Octagon again. The landfill tax assessment did not contain any equivalent wording, although HMRC later wrote to Octagon on 1 November making the same points: the landfill tax assessments were to be held in abeyance until the end of the investigation. In August 2020, on the Crown Prosecution Service deciding not to prosecute, HMRC sought to enforce the assessments through proceedings in the Magistrates Court in December 2020, which prompted Octagon to appeal to the FTT three days later. HMRC, despite what they had said in correspondence, objected to Octagon being granted permission to appeal late. The FTT granted permission in relation to the VAT assessment, but denied it in relation to the landfill tax assessment. The Upper Tribunal has now granted permission for Octagon to also appeal the landfill tax assessment. New evidence showed that Octagon could have reasonably formed the impression from HMRC’s correspondence in November that no further action was required in relation to the landfill tax assessment. The UT accepted that the four-year delay in submitting the appeal was significant and serious, but that there was a good reason for the delay. On balance, particularly as the VAT appeal addressed the same facts, Octagon should be granted permission to appeal the landfill tax assessment. (Contact: David Walters)

Department of Health: smoking consultation and potential duty on vaping

In the King’s Speech on 7 November, reference was made to the Government’s intention to introduce legislation to create a smokefree generation. This follows on from the consultation: creating a smokefree generation and tackling youth vaping published last month by the Department of Health and Social care. Included in the proposals under consideration is a new duty on vapes. The consultation states that there is currently a significant difference in price between vapes and tobacco products (due to the latter being subject to duty), and this could encourage smokers to switch from cigarettes to vapes. However, this also means that vapes are more readily accessible to young people and other non-smokers. A number of countries have introduced a tax on vapes, although research on the effects of e-cigarette taxes on use shows that whilst taxes are associated with reductions in vaping, it is at the potential risk of increasing youth smoking. The consultation closes on 6 December 2023. (Contact: Andrew Clarke)

EU: 2024 version of Combined Nomenclature

On 31 October 2023, the European Commission published the latest version of the EU's Combined Nomenclature (CN) applicable as from 1 January 2024. The Combined Nomenclature forms the basis for the declaration of goods (a) at importation or exportation, or (b) when subject to intra-Union trade statistics. This determines which rate of customs duty applies and how the goods are treated for statistical purposes within the EU. (Contact: Sam Kiely)

This week’s CJEU court calendar

On 16 November, the CJEU will deliver its judgments in Viterra Hungary Kft on the classification of soya meal and Tuke Busz on duty on fuel for bus maintenance, and we are expecting Advocate General Opinions in Gabel Industria Tessile SpA on direct action against the state and DIAS w Bydgoszczy on unjust enrichment.

EMEA Dbriefs webcasts

The next EMEA Dbriefs Tax webcast is on Wednesday 14 November 2023 at 12.00. November’s UK Tax Monthly Update will be hosted by David Walters and our panel will provide an update on the latest news in corporate, employment and indirect tax.