Indirect tax news from the past week
Dollar Financial: date of joining VAT group cannot be amended – FTT
Dollar Financial UK Ltd (Dollar), a payday lender, applied to include Dollar Financial Group Inc (DFGI), its US parent, in its UK VAT group. DFGI had seconded staff to Dollar in 2011-12, but only applied to join the VAT group from June 2013. In 2016 Dollar asked for DFGI's VAT group membership to be backdated (on the basis that DFGI had a UK establishment from 2011, and would have joined Dollar's VAT group at that time). If VAT grouping could be amended in this way, then Dollar should not have accounted for VAT of £2.2m on charges from DFGI under the reverse charge. The First-tier Tribunal noted that VATA 1994 refers to four specific types of VAT grouping application, including an application for another person (i.e. a company outside the VAT group) to be included in the VAT group. However, there is no statutory provision which states that an existing member can change the date on which it joined a VAT group. The FTT has therefore ruled that the request submitted by Dollar in 2016 was not a valid VAT grouping application. The FTT also rejected Dollar's attempt to present its case as relating to VAT registration or overpaid VAT, as HMRC had not made any decision on these issues. In the absence of an appealable decision, the FTT struck out Dollar's appeal. There was therefore no need for the FTT to consider whether the presence of the US secondees meant that DGFI has a UK establishment, an issue that will come before the Upper Tribunal in October 2021 in HSBC. (Contact: Judith Lesar).
Scanwell Logistics: onward supply relief not available for import agent – FTT
In 2012, Scanwell Logistics was approached by Calleva, a Czech freight company, to act as import agent for some Czech companies that were importing goods from China into the EU via the UK. Scanwell received documents from Calleva concerning imports (bills of lading, invoices, packing lists, etc.), which it used to make customs declarations. The First-tier Tribunal has ruled that it was not entitled to apply onward supply relief (during pre-Brexit periods), and should have paid import VAT of £5.7m. Scanwell argued that, although it never owned the goods, it was deemed to have supplied them as agent and should therefore be entitled to apply OSR. However, the FTT has ruled that this relief was not available to import agents. By completing the customs declarations, Scanwell was potentially liable for import VAT. However, it was not supplying the goods on behalf of the Chinese sellers (i.e. it was not a disclosed agent selling the goods). The rules on undisclosed agency also applied to agents who were helping to effect a transfer of title from principal to customer. Scanwell had no such authority, and did not act in its own name in relation to the goods (except in making the customs declarations). As its role was limited, it was not entitled to apply OSR (it should have adopted the external community transit procedure instead). Its appeal was dismissed. (Contact: Gareth Pritchard).
NHS and government salary sacrifice car schemes – draft legislation
In RCB 19(2020) HMRC announced their intention to revoke SI 1992/630 (the “De-Supply Order”) which had allowed the NHS not to account for VAT on salary sacrifice employee car schemes, even though it could recover VAT on acquiring the cars under s.41 VATA 1994. Draft legislation has now been published, under which the De-Supply Order would be revoked in relation to any supplies made after 21 October 2021, except where they arose from a salary sacrifice agreement of up to three years entered into before that date, and the employer agreed to pass any VAT reclaimed under s.41 to the employee. The draft legislation and TIIN make it clear that HMRC do not expect this measure to have any impact on salary sacrifice schemes in the private sector. (Contact: Oliver Jarratt).
Notification of Uncertain Tax Treatments (NUTT) – draft legislation
Draft legislation for the requirement to notify HMRC of uncertain tax treatments has been published, which is expected to apply from April 2022. The draft legislation sets out three ways in which a VAT treatment might be classified as uncertain, which is a reduction from the seven possibilities considered in the most recent NUTT consultation. Nevertheless, applying the tests to VAT may not be straightforward. For example, it may require businesses to consider whether or not HMRC’s guidance has changed between the time of a supply and the annual deadline for a NUTT notification. Further guidance is therefore expected in due course, although the draft legislation now provides sufficient detail for businesses to consider whether their current VAT compliance processes can be adapted to meet the new requirements. (Contact: David Walters).