Indirect tax news from the past week
Wellcome Trust: reverse charge on overseas investment management fees – CJEU
Wellcome Trust (a charitable fund worth over £23 billion which supports medical research) incurred fees of £65m over five years from non-EU investment managers. It is registered for VAT in the UK (because it also receives substantial property income) and therefore was not receiving services as a consumer (B2C). Some 25 years ago the CJEU ruled that Wellcome was not acting in a business capacity either (when managing its non-EU investments) so Wellcome argued it should not apply the reverse charge to the investment managers' services because it was not a “taxable person acting as such” (i.e. receiving B2B services). The CJEU, however, has ruled that the definition of a business customer for the purposes of determining the place of a supply is broader than the definition of a business activity for input tax recovery purposes (the subject of its judgment in 1996). The definition of B2B services as being to a “taxable person acting as such” is simply carving out services intended for the private use of the taxable person or their staff. Services which are received for a non-economic activity, such as the management of Wellcome’s non-EU equity portfolio, should be treated as B2B supplies, and the reverse charge applied. For further analysis of this judgment (and the impact of changes to UK place of supply rules from 1 January 2021) see here. (Contact: Hayley Smith).
Postponed import VAT accounting certificates: more issues
Earlier this month, HMRC reported that some postponed import VAT accounting (PIVA) certificates had accidentally included some of February’s imports on January’s certificates. Since then, another problem has emerged, and some taxpayers have been unable to access PIVA certificates at all. HMRC have amended their guidance to reassure taxpayers that certificates will become available again in due course. In the meantime, additional advice is provided on how to estimate import VAT on any VAT returns which are submitted before the issue is resolved. The guidance has also been updated to reflect that the ability to delay customs declarations for some imports from the EU has been extended from 30 June 2021 to 31 December 2021. (Contact: Alistair Lord).
P: VAT on fuel cards – CJEU
Transport companies frequently arrange fuel cards for their drivers in order to centralise fuel purchasing. The CJEU has previously ruled that the fuel card provider is not involved in supplying fuel, but is providing a financial service (funding the purchase of the fuel). This is at odds with the practice in various countries (historically, including Poland). P, a fuel card provider based in Lithuania that supported transport companies operating in Poland, faced a multi-layered challenge from the Polish tax authorities, which claimed (1) that P should treat itself as a provider of financial services (and therefore unable to recover any input tax), but that (2) it also remained under an obligation to account for any output tax shown on invoices issued to the transport providers. A further complication arose because (3) the tax authorities had opened an investigation, and under Polish law P was not therefore permitted to issue credit notes to the transport companies to correct the output tax. For the CJEU, this additional complication was a step too far. As P had been acting in good faith, it ruled that P should be permitted to adjust the invoices, despite the fact that an investigation had started. (Contact: David Walters).
VS: European road trip brings unexpected VAT and duty cost - CJEU
In October 2017, VS drove a car that he had bought in Turkey back to Germany (where he was resident) via Bulgaria, Serbia, Hungary, and Austria. Just before VS returned to Turkey and sold the car (in March 2018), the German tax authorities notified him that the car had not been properly imported into the EU, and demanded customs duty of €1.5k and import VAT of €3.3k. The CJEU has confirmed that both amounts were due. VS’ reliance on temporary importation was misplaced (as an EU resident, he was not entitled to such relief). Under the Union Customs Code, duty became due in Germany where the irregular importation was discovered (because it was less than €10k). In addition, the CJEU ruled that the import VAT liability followed the rules for customs duty where (as appeared to be the case here) the car entered the EU’s economic network in Germany, even though its initial entry into the EU was in Bulgaria. (Contact: Michael Watson).