Weekly VAT News

Indirect tax news from the past week

20/12/2021

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Imports from Ireland, from 1 January 2022

The first phase of new customs controls for imports from the EU will be implemented on 1 January 2022. Implementation for goods moving from Ireland to Great Britain is complicated by the need to ensure unfettered access for goods from Northern Ireland, and because negotiations on the Northern Ireland Protocol will not be definitively completed by 1 January. Given this uncertainty and complexity, Lord Frost (Minister of State in the Cabinet Office) has announced in a Written Ministerial Statement (HLWS473) that "goods moving from the island of Ireland directly to Great Britain will continue to do so on the basis of the arrangements that apply currently, until further notice; and will not, for now, be affected by the changes being introduced on 1 January for all other inbound goods." This change will be legislated for before 1 January 2022, and the Border Operating Model has been updated accordingly. It means that importers of non-controlled goods from Ireland to Great Britain, or from Northern Ireland to Great Britain via Ireland, can continue to delay making their customs declarations for up to 175 days if they make an entry in declarant’s records at the time of import. (Contact: Andrew Clarke). 

New statutory instruments relating to Plastic Packaging Tax

From 1 April 2022, Plastic Packaging Tax will encourage the use of recycled plastic instead of new plastic material within plastic packaging. To ensure the tax is properly targeted, SI 2021/1417 specifies that “packaging components” will not include plastic cases used by customers for keeping tools, first aid kits, glasses, etc.; nor packaging that is integral to a product (e.g. printer cartridges, inhalers, and tea bags); nor re-usable sales display shelves and poster display stands. PPT will, however, be levied on products that are single-use and become packaging only when the customer uses them (for example, rolls of bin bags, carrier bags, or disposable plates). The SI therefore highlights some of the decisions that businesses will need to consider in relation to PPT and gives legislative effect to guidance published by HMRC in November. SI 2021/1409 is an Appointed Day Order for PPT. It confirms that the tax will come into effect on 1 April 2022 and allows further regulations developing the rules set out in Finance Act 2021 to be made by statutory instrument. (Contact: Will Graham). 

Donnelly: scope of the tribunals to consider agreed facts – UT

In 2019 the First-tier Tribunal ruled that Laurence Donnelly’s company, Korum Wholesale Ltd, had deliberately and inaccurately recovered VAT on eleven consignments of alcohol that were connected with VAT fraud. However, it allowed Mr Donnelly’s appeal against an associated penalty, as HMRC had not proved that the transactions had taken place. If Korum had not really purchased the alcohol, it reasoned, then it could not sell it, and could not be liable for output tax (in which case, the “potential lost revenue” on which the penalty was calculated was reduced to nil). This may have been a surprise to Donnelly, who had explained to the FTT how Korum had procured, stored, transported and insured the alcohol. The Upper Tribunal has now ruled that the FTT should not have imposed a burden of proof on HMRC to demonstrate facts that were not in dispute. It therefore restored the FTT’s alternative decision that, if the supplies had taken place, then the penalty had been properly imposed. HMRC’s appeal was allowed. (Contact: Rob Holland). 

Kemwater: input tax and supplier identification – CJEU

Over recent years the CJEU has distinguished between formal and material conditions for input tax recovery. It has also been prepared to forgive certain errors on supplier invoices. More recently, however (in Ferimet last month, and now in Kemwater Prochemie), the CJEU has emphasised the importance of correct evidence. The name of the supplier on an invoice may in theory be a formality, but the supplier’s status as a taxable person is critical to establishing that a supply is subject to VAT and that input tax actually exists. Kemwater purchased advertising at a golf tournament from Viasat but was denied input tax recovery of €1,500 by the Czech tax authorities on the basis that it could not prove that the services were actually from Viasat (it did not help that its managing director had no knowledge of supplying Kemwater). The CJEU ruled that it was unnecessary for customers to check the taxable status of all their suppliers but the absence or incorrect name of a supplier on an invoice might make it impossible to determine that the supply had actually been made by a taxable person. In such cases the CJEU has confirmed that input tax recovery could be denied. (Contact: David Walters). 

Compliments of the season

This is the last edition of Weekly VAT News for 2021 – the next issue will be published on 10 January 2022. We wish all our readers a very happy Christmas, and a peaceful and prosperous New Year.