Weekly VAT News

Northern Ireland: registration for the Import One Stop Shop

The Import One Stop Shop (IOSS) is an optional simplified VAT accounting scheme that can be used by Northern Ireland businesses to account for VAT on distance sales transactions. The scheme came into effect on 1 July 2021. A Northern Irish business can choose to register for the IOSS scheme to report and pay VAT on goods valued at £135 or less (low value goods) that are imported into the EU or Northern Ireland, and sold to consumers in the EU and/or Northern Ireland. At present, Northern Irish businesses are only able to register for the IOSS in an EU member state. From 1 March 2024, Northern Irish businesses will be able to register with HMRC for the Northern Ireland IOSS. (Businesses from outside the EU and Northern Ireland will in future be able to register through an intermediary, but the Northern Ireland IOSS is not yet available for intermediary registrations.) The Finance Act 2021, Section 95 and Schedule 18 (Distance Selling: Northern Ireland) (Appointed Day No. 2) Regulations 2024 bring the relevant legislation into force, and HMRC have published a collection of guidance on the IOSS, including guidance on registration, returns, and payment. A business can only register for one IOSS scheme; if a business is already registered for the IOSS scheme in an EU member state, it must cancel that registration before registering for the Northern Ireland scheme. VAT on sales of low value goods located in Great Britain must be accounted for on the normal UK VAT return, and VAT on goods sold by an online marketplace will be accounted for by the marketplace. (Contact: Jason Craig) 

Tornado Wire Ltd v John Good Logistics Ltd: customs agent and steel quotas – HC

The High Court has considered an application for summary judgment by a customs agent (John Good Logistics) whose client (Tornado Wire) had made a claim for damages for breach of contract and/or negligence. Between August 2020 and June 2021, John Good Logistics processed 327 or more import declarations for Tornado Wire’s galvanised steel imports. Some of the import declarations did not have the appropriate information or quota number in the CHIEF system, and made incorrect use of duty override codes. Consequently, Tornado Wire’s imports did not fall within the duty free quota, and import duty of £953k (at 25%) had to be paid. The High Court concluded that Tornado Wire’s claim was not necessarily time-barred, and should proceed to a full trial. The judgment highlights how important it is for customs declarations to be correctly completed and submitted. (Contact: Bob Jones) 

Gemeente Dinkelland: interest on VAT repayment – CJEU

Like many municipalities, much of what Gemeente Dinkelland does is outside the scope of VAT (as non-business activity), but it also makes some supplies in the course of business that are exempt from VAT, and some on which it charges VAT. It is entitled to some input tax recovery in relation to its taxable activity, and is also entitled to compensation from a central government fund (the BCF) for VAT incurred in relation to its non-business activities (cf. s.33 VATA 1994). Following amendments to Dutch legislation on municipal accounting in 2016, Gemeente Dinkelland had to adjust the balance between these two methods of recovering VAT, with retrospective effect. It was repaid additional input tax of €706k for 2012 to 2016, but had overclaimed compensation from the BCF. The CJEU has now considered the extent to which the municipality should be entitled to interest on the VAT repayment. It is well established that EU Member States must pay interest on tax levied in breach of EU law, and that interest should represent an adequate indemnity. In this case, however, there would only have been a breach of EU law if the official allocation key originally used to split costs between business and non-business activities had been defective. The original allocation key sought to reflect how costs were used, and left some discretion for municipalities on how it should be operated. Therefore, Gemeente Dinkelland’s VAT repayment stemmed from its failure to exercise a right of deduction, rather than from a breach of EU law. Interest on the repayment did not therefore start to accrue from the dates that VAT was originally overpaid. (Contact: David Walters)

This week’s CJEU VAT case calendar

On 29 February, the CJEU will deliver judgments in Consortium Remi Group on the limitation period for bad debt relief claims, and in B2 Energy on the need to identify the recipient of an intra-Community supply.