Weekly VAT News

UK carbon border adjustment mechanism: further consultation

On 21 March 2024, HM Treasury and HMRC opened a joint consultation on the introduction of a UK carbon border adjustment mechanism (CBAM). This follows an initial policy consultation from March 2023, and the government's response of 18 December 2023. From 1 January 2027, a CBAM will apply a charge on the carbon emissions embodied in imports of certain carbon-intensive goods from the following sectors: aluminium; cement; ceramics; fertilisers; glass; hydrogen; and iron and steel. The consultation sets out how the government intends to structure and administer a CBAM, and seeks views from importers, their agents, other businesses, individuals, tax advisers, trade and professional bodies and other interested parties. The government is also inviting parties interested in participating in a roundtable discussion, and/or who want to be added to a ‘CBAM mailing list', to contact them via cbampolicyteam@hmrc.gov.uk. The consultation is open for 12 weeks until 13 June 2024, and the government will aim to analyse responses within 12 weeks of the end of the consultation and will publish a formal response document in due course. Following this consultation, the government will prepare primary legislation which stakeholders will have an opportunity to comment on. (Contact: Zoe Hawes)

Changes to HMRC telephone helplines: update

On 19 March 2024, HMRC published a number of related documents on restrictions of certain HMRC customer telephone lines including the VAT helpline. The changes, summarised in a press release, stated that “changes to helpline services to encourage people to go online first have been successfully trialled over the last year and are being rolled out to become a permanent feature of the way HMRC supports customers from 8 April 2024.” From a VAT perspective, it was explained that the VAT helpline will be open for five days every month ahead of the deadline for filing VAT returns. Outside of this time, taxpayers will be directed to use HMRC’s online services. However, on 20 March 2004, HMRC issued a further press release halting these changes. The press release explained that "HMRC is now halting its plans in response to the feedback while it engages with its stakeholders about how to ensure all taxpayers’ needs…are met as HMRC shifts more people to online self-service in the longer term…This means the phone lines will remain open between April and September." (Contact: Andrew Clarke)

DIAS w Bydgoszczy: credit notes and unjust enrichment – CJEU

In Poland, a credit note has to be acknowledged by a customer before a supplier can adjust its VAT. The Polish tax authorities invoked this rule to deny a claim for overpaid VAT by B, who ran a gym and had accounted for VAT at 23% rather than 8%. B had never been required to issue invoices to customers using the gym, and could not therefore issue credit notes. The CJEU observed that the price charged by B was deemed to include VAT at the correct rate of VAT (8%), even if, as in this instance, the standard VAT rate (23%) had been mistakenly applied. Denying a claim for overpaid VAT because B had not issued VAT invoices was a breach of the principles of effectiveness and equal treatment (because some direct competitors would only have accounted for VAT at 8%). The CJEU acknowledged that the Polish tax authorities might reject the claim if it would unjustly enrich B, but they would have to provide an economic analysis satisfying the Polish courts that the burden of the additional VAT had been borne by B’s customers without affecting B’s business. The Polish tax authorities could not therefore deny B’s claim based on an invoicing technicality and, subject to any successful unjust enrichment defence, B’s VAT claim should be paid. (Contact: David Walters)

This week’s VAT case calendar

On 26 March, the Court of Appeal will hand down its judgment in the case of Prudential Assurance Company Ltd regarding the interaction of the tax point rules for continuous supplies of services and VAT grouping.