Indirect tax news from the past week
Customs duty legislation
Thirteen indirect tax statutory instruments have been laid before Parliament, mostly relating to the customs duty system that will need to be operative from 1 January. SI 2020/1430 establishes the UK Global Tariff, and there are other instruments dealing with reliefs (including four new reliefs), origin and preference, quotas, suspension, transit procedures, etc., as well as transitional rules. The instruments are expected largely to give effect to existing announcements and guidance about the UK customs system, but further analysis to check whether they (and associated reference documents published by HMRC, such as the tariff itself) contain any additional issues will be required for businesses that trade outside of the UK. Therefore given the volume of output, it is possible that some aspects of the new system will not come into focus until the New Year. (Contact: Caroline Barraclough).
UK Trader Service: businesses urged to sign up by 31 December
Further to the Withdrawal Agreement Joint Committee’s recent guidance, HMRC have published details of the UK Trader Scheme which will allow authorised businesses to self-declare that goods are not “at risk” of moving on to the EU after moving from GB to NI, and consequently should not be subject to EU duty. Businesses who do not sign up could have to pay tariffs on their goods. Affected businesses should therefore apply for authorisation before 31 December, as authorisation needs to be obtained before goods are moved. If applications are made next year, but before 28 February 2021, then a provisional authorisation may be granted for up to four months, but otherwise HMRC expect that it could take a month to process an application. (Contact: Andrew Clarke).
Bakati Plus and RCB 21(2020): retail exports
Under the Principal VAT Directive, goods bought by travellers from outside the EU which they take back home in their personal luggage are exempt from VAT. This helps to ensure that goods bought on the high street by tourists are taxed in a similar way to commercial exports, and taxed at the place of consumption (while helping to promote tourism). In Bakati Plus, the CJEU has considered the limits to this exemption. Three Serbian families rented a warehouse just over the Hungarian border, purchased food, cosmetics, and cleaning products worth €2-3m pa in Hungary from Bakati Plus, and claimed a VAT refund from it. The CJEU considered the usual meaning in everyday language of “personal luggage”, by reference to the context and intention of Article 147 PVD, and concluded that exemption did not apply. Bakati Plus should not have refunded the VAT to the Serbian families. Meanwhile, in the UK, RCB 21(2020) confirms that this relief is to be withdrawn from GB retailers for goods supplied after 31 December. (Contact: David Walters).
Fenix International: last-minute UK reference to the CJEU on agency/principal – FTT
Fenix International operates the OnlyFans social media website where Creators upload and post photos and videos, which Users can pay to access. Fenix accounted for VAT on its 20% commission, but HMRC assessed it for £11.2m on the basis that it should have treated itself as both recipient and supplier of the Creators' content. Article 28 PVD sets out that an undisclosed agent "acting in his own name but on behalf of another person" is deemed to receive and make a supply. However, for online services delivered by platforms like OnlyFans, the rules go further. Article 9a of Regulation 282/2011 introduces a rebuttable presumption that the platform is acting as an undisclosed agent, and then (as Fenix argued) goes even further and makes the presumption almost impossible to rebut. The FTT recognised a strong argument that Article 9a was a radical change to the rules on place of supply, and agreed (with only weeks to go before the end of the Transition Period) to refer a question to the CJEU challenging its validity. (Contact: Abi Briggs).