Weekly VAT News

Indirect tax news from the past week


Devon Waste: where there’s muck, there’s brass, and landfill tax – CA

Landfill sites minimise environmental contamination from landfill gas and from liquid (leachate) by installing subsoil drainage which is covered by a metre of compacted clay, then an expensive plastic geomembrane, a permeable geotextile layer, and 40cm of gravel. On top of that, a 1-2m layer of lightly compacted black bag domestic waste (“fluff”) is laid. It is first checked for suitability – it must not contain hard, sharp objects which might damage the membrane, and it must not be full of fine waste which could impede drainage. The Court of Appeal has ruled that landfill tax was chargeable on this fluff. The statutory test was whether the fluff was disposed of as waste (i.e. with an intention of discarding it). The Upper Tribunal (which found in favour of the landfill site operators) considered whether the operators had used the fluff and whether “use” negated an intention to “discard”. In the CA’s judgment, this focus on use (derived from other landfill tax judgments) had obscured the correct statutory test. The operators were disposing of the fluff as waste, just in a particularly careful manner. As the operators had disposed of the fluff as waste, landfill tax was due. (Contact: Tom Shaw).

Wilo Salmson: the importance of invoices in Directive claims – AGO

In 2012, Wilo Salmson (based in France) bought tooling from ZES Zollner Electronic in Romania, as part of an agreement for ZES to manufacture goods for Wilo Salmson there. The Romanian tax authorities rejected a Directive claim for VAT of €92k on the tooling, as ZES had not apparently been paid (a requirement in Romania at the time) and because its invoice was defective. In 2015 ZES therefore cancelled and reissued the invoice, and Wilo Salmson submitted a second Directive claim. In the Opinion of AG Julianne Kokott, invoices are essential in showing how much VAT can be claimed, and so there can be no VAT recovery before an invoice is issued. If the invoice issued in 2012 was valid (there have been several CJEU judgments confirming the validity of invoices even if they breach certain formal requirements) then Wilo Salmson should have contested Romania’s decision to reject the first Directive claim, and its second Directive claim was time-barred. However, if a valid invoice was only issued in 2015, then that was the first occasion on which Wilo Salmson was entitled to reclaim the VAT, and its second Directive claim would be in time. (Contact: David Walters).

JK: do fast food outlets provide food or catering? – CJEU

In Poland, food is subject to a reduced VAT rate of 5% whereas catering and restaurant services are subject to a reduced rate of 8%. The choice between the two classifications is not as stark as in the UK (zero-rated or 20%) but was sufficiently important for one fast food franchisee to seek a reference to the CJEU. The CJEU has provided further guidance on how to distinguish between food and catering, drawing on the definition of catering for place of supply purposes, as well as from previous CJEU judgments. In its view, food accompanied by “sufficient support services intended to enable immediate consumption” is a supply of catering. The national court should consider whether waiters served customers at their tables, whether customers ate in an enclosed room, and whether the franchise provided access to toilets, as well as use of crockery, furniture and cutlery. Such factors should be assessed from the customer’s perspective (i.e. if they did not use the facilities but decided to take their meal away, then it was a good indicator that the service element of the frachisee’s supply was not important and a supply of food was taking place). (Contact: Katy Broome).

Statutory Instruments on importing reusable packaging etc.

Two further statutory instruments have been made which supplement the extensive legislative changes that came into effect at the end of the Brexit transition period. SI 2020/478 relates to how to declare certain goods for import or export. It allows much reusable packaging to be declared either orally or by conduct, permits emergency imports of human blood to be declared by conduct, but requires full declarations for excise goods for commercial use carried in accompanied baggage. SI 2021/483 corrects an omission in earlier legislation and ensures that there will be VAT relief, no customs duty, and no customs formalities (in most cases), when goods which have temporarily moved to Northern Ireland return to Great Britain. (Contact: Andrew Clarke).