Weekly VAT News

Indirect tax news from the past week


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Hewitt: protecting VAT claims - a tale of two farmers - UT

Towards the end of 2012, HMRC wrote to two farmers informing them that their entitlement to use the agricultural flat rate scheme was being revoked for the protection of the revenue. Mr Hewitt accepted HMRC’s decision. Mr Shields did not, and following a reference to the CJEU he eventually overturned HMRC’s decision in 2017. Mr Hewitt then sought to resurrect his claim, but the First-tier Tribunal refused to grant him permission to submit an appeal which by then was five years after HMRC’s original decision. The Upper Tribunal has rejected Mr Hewitt’s appeal against that decision. The principle of effectiveness did not require time limits for submitting an appeal to be measured from the date of the CJEU’s judgment in Shields; nor from the date that Mr Hewitt became aware that he had valid grounds for challenging HMRC. Like Mr Shields, Mr Hewitt could have challenged HMRC's decision immediately. He chose not to do so, and as a consequence he had no entitlement to backdate his AFRS registration to 2012. (Contact: Judith Lesar

New guidance on the One Stop Shop Union Scheme

HMRC have updated their guidance explaining how to report and pay VAT due on the distance sales of goods from Northern Ireland to consumers in the EU using the One Stop Shop (OSS) Union scheme. The OSS VAT return service will be available from 1 October 2021 through the Government Gateway. HMRC have provided more information about the OSS record-keeping requirements. New guidance on completing and submitting OSS returns explains that businesses will be excluded from the OSS Union scheme if they miss return submission or payment deadlines for 3 consecutive periods, and do not rectify the position within 10 days of a reminder being sent. HMRC have also updated their guidance on the EU e-commerce package. It explains that the UK Import OSS (IOSS) registration portal is not currently available and further guidance will be provided when the system is available. It also explains that the UK is in discussion with the EU Commission about the issue of fiscal representatives in relation to businesses in Great Britain that register for the EU IOSS scheme. (Contact: Andrew Clarke

Richmond Hill: zero-rating substantial reconstructions of listed buildings 

Since 2012, zero-rating has only applied to “substantial reconstructions” of listed buildings, and not to “approved alterations”. Richmond Hill Developments (Jersey) Ltd shows how difficult it can be to access this more limited relief. RHD redeveloped the Royal Star and Garter Home (a nine-storey Grade II-listed property built in the 1920s to care for injured war veterans) into 86 flats. The works were substantial (the project cost £95m), but most of the reinforced concrete floors, a steel frame supporting the roof and upper floors, and ten chimney stacks had to be retained, as removing them would have compromised the structural integrity of the building. To qualify as a “substantial reconstruction” all that can be left of the old building is the external walls and roof. The First-tier Tribunal has ruled that “walls” did not include everything that was structurally necessary to prevent them from collapsing, and that retaining the floors, steel frame, and chimney stacks meant that the development could not be zero-rated. In any event, RHD’s redevelopment also retained an original marble-lined grand entrance and staircase, and the FTT was not prepared to disregard such features as trifling. The property may have been completely redeveloped, but too much of the original remained for it to have been “substantially reconstructed”, and RHD’s appeal was dismissed. (Contact: Ben Tennant

GE Auto Service: late evidence cannot save Directive claim – CJEU

In 2005 and 2006, GE Auto Service Leasing GmbH incurred Spanish VAT on buying cars which it leased to Spanish businesses. As it was not established in Spain, it submitted a Directive claim to recover the VAT. The Spanish tax authorities requested further information, but Auto Service was initially unable to comply. Following the rejection of its claim, it did manage to provide the information, either to the tax authorities immediately after the rejection or in subsequent tribunal proceedings. Auto Service had therefore demonstrated compliance with the formal and substantive requirements for claiming VAT, but it had done so late. In the CJEU’s judgment, EU Member States can reject VAT claims which are deficient, even if they are later supplemented by additional information. Spanish rules needed to respect the principles of effectiveness and equivalence. However, the tax authorities had twice asked Auto Service to provide information within a reasonable timeframe, and had not therefore made the claim excessively difficult (effectiveness). Unless the national courts conclude that procedural provisions governing Directive claims were less favourable than domestic law (equivalence), then the tax authorities had been within their rights to reject Auto Service’s claim. (Contact: David Walters)