Indirect tax news from the past week
CHAPS payments to non-established traders
To date, HMRC have repaid VAT due to overseas traders that are registered for UK VAT by payable order. However, HMRC have been informed that there has been an increase in banks and countries which no longer accept payable orders. HMRC have therefore announced that they are creating a form, accessible through the government gateway, that will allow traders to provide details of their overseas bank accounts. These details will allow HMRC to make repayments by CHAPS instead of sending a payable order. (Contact: Katie Ware).
Promexor: refusal to re-register Romanian business for VAT - CJEU
In 2014, after Promexor Trade SRL had not declared any taxable transactions for six months, its Romanian VAT registration number (VRN) was automatically revoked. Promexor continued trading, but was not allowed to re-register for VAT as its director was shareholder of another company that was in insolvency proceedings. It therefore issued invoices exclusive of VAT and did not recover any input tax. In 2019, the Romanian tax authorities audited Promexor, which submitted amended data showing that VAT on its costs had exceeded output tax that it should have charged since 2014, meaning that it owed no VAT. Nevertheless, Romania persisted in seeking to collect the output tax, without acknowledging any right to input tax recovery. The CJEU has ruled that Romania was entitled to seek output tax on supplies made by Promexor after its VRN was revoked, but only if it permitted Promexor to re-register for VAT and deduct input tax. The involvement of its director in another insolvent company was not a sufficient reason for refusing re-registration. (Contact: David Walters).
Kubota: RTV X900 not classified as SPV dumper – UT
In 2013 the Upper Tribunal ruled that Kubota’s Rough Terrain Vehicle 900 (RTV 900) should be classified as a duty-free dumper, rather than under a miscellaneous classification which attracted 10% duty. In 2015, however, a referral to the European Commission’s Customs Code Committee resulted in Regulation 2015/221, which classified a similar vehicle as a general multipurpose vehicle that was not sufficiently sturdy to be a dumper, even though its flat-bed body could be tipped. HMRC issued a binding tariff information applying duty to imports of Kubota’s new model (the RTV X900). Kubota appealed. The First-tier Tribunal noted that the vehicle in Regulation 2015/221 had a manual rather than a hydraulic tipper, an open cabin, and could tow almost twice as much as the RTV X900. Nevertheless, it concluded that the regulation applied by analogy, and the Upper Tribunal has now endorsed its approach. There was no need to conduct an analysis of the tariff subheading for dumpers before considering whether the regulation applied. The FTT had correctly applied the law by considering the differences between the two vehicles, and its finding that they were similar was an evaluative exercise that took account of all relevant evidence. RTV X900 was subject to duty, and Kubota’s appeal was dismissed. (Contact: Sam Kiely).
Tax Administration and Maintenance Day scheduled for 30 November
The government has announced that there will be a Tax Administration and Maintenance day on 30 November 2021. This will involve the publication of new consultations, summaries of responses to closed consultations and technical information notices, and will address ongoing policy initiatives including the modernisation and improvement of the tax system and its administration.
Mitchell & Bell: disclosure issues in joined penalty appeals – UT
HMRC assessed Universal Payroll Services Ltd and Universal Project Services Ltd for input tax, as the companies could not demonstrate that they had paid for, or indeed ever received, certain supplies. The companies went into liquidation, and so HMRC issued personal liability notices for £6m against Paul Bell and Mark Mitchell on the basis that they were shadow directors. The First-tier Tribunal directed that Bell and Mitchell’s appeals against the penalties should be heard together. Early in proceedings, however, it emerged that Mr Bell alleged that Mr Mitchell controlled the companies, whereas Mr Mitchell argued that Mr Bell was responsible for them. The fact that Mitchell and Bell were blaming each other created difficulties for HMRC in deciding what evidence to disclose, as they had obtained documents in the course of an investigation into Mr Mitchell’s direct tax affairs, but Mr Mitchell challenged their relevance to the VAT appeals. The Upper Tribunal has endorsed the FTT’s decision about disclosure. It had been right to rule that documents referring to interactions between Mitchell and Bell could be disclosed by HMRC; whereas documents showing interactions between Universal and other companies, or Mr Mitchell’s interactions with other companies, could only be disclosed if HMRC had identified those companies in its statement of case. (Contact: Adam Routledge).