Weekly VAT News

GfC14: Help with Freeports

HMRC have published their latest Guidelines for Compliance (GfC). GfCs are intended to help taxpayers and their advisers understand HMRC’s views on approaches taxpayers can take to lower the risk of tax non-compliance. GfC14: Help with Freeports sets out the tax reliefs and customs benefits of Freeports, which include Freeport special tax sites and Freeport customs sites (referred to as ‘free zones’). The GfC sets out the VAT and customs reliefs (which are only available in customs sites), how to qualify for the reliefs, and common errors made by businesses. The GfC also sets out the direct tax reliefs, which are available within special tax sites. (Contact: Jeffrie Mann)

Isle of Wight NHS Trust: VAT treatment of supplies of locum doctors – FTT

HMRC issued a decision in August 2021 to Isle of Wight NHS Trust (the Trust) that the supply of locum medical practitioners to the Trust by agencies was not an exempt supply under Item 5, Group 7, Schedule 9, VATA 1994, which exempts “the provision of a deputy for a person registered in the register of medical practitioners”. The Trust’s appeal against the decision was designated as a lead case, with 20 appeals stayed behind it. The First-tier Tribunal has held that the exemption applied. Having first determined a number of preliminary/procedural issues, the FTT found that Item 5, according to its ordinary meaning, exempts the supply of a deputy, that is, a person appointed to act on another’s behalf, where that other person is registered in the register of medical practitioners. Nothing in the legislative or historical context to the taxation of such deputising services disapplies this ordinary meaning. The FTT also found that Item 5 is ultra vires the EU Principal VAT Directive (PVD), as it exempts a supply of staff and not the supply of medical care. The FTT concluded that it was not possible to apply a conforming interpretation (the Marleasing principle) to interpret Item 5 in accordance with the PVD (disagreeing with the FTT in Rapid Sequence Limited). To interpret Item 5 as requiring the provision of medical care would be contra legem (against the law). The FTT applied this interpretation of Item 5 to the facts before it, and concluded that, on the basis of the evidence provided, the Trust had received services that should have been treated as exempt. The FTT allowed the Trust’s appeal. (Contact: Phil Simmons)

Telamara Limited: VAT liability of nitrous oxide for culinary use – FTT

Telamara Limited supplied nitrous oxide (N2O) in canisters intended exclusively for culinary use as cream chargers, used for whipping cream and making foams and mousses, etc. Telamara considered that the supply of the N2O canisters should be zero-rated for VAT purposes as food. HMRC disagreed, and assessed Telamara for VAT. The First-tier Tribunal has held that N2O was not food. The FTT noted that N2O is a gas, incapable of being eaten or drunk. While the FTT considered that N2O is not nutritious, it noted that zero-rating can apply to the supply of substances that are not nutritious in themselves, but are used as ingredients, such as bicarbonate of soda. However, N2O was “materially dissimilar” to bicarbonate of soda, which is combined with other ingredients to produce a different food product, unlike N2O, which merely changes the form of the cream. Although N2O is recognised as a food grade additive, this does not determine the VAT treatment. The FTT dismissed Telamara’s appeal. (Contact: Andrew Roberts)

HMRC ‘one-to-many’ campaign – Input tax: Facilities management services

The Chartered Institute of Taxation (CIOT) has reported that HMRC are undertaking a one-to-many campaign to alert businesses providing facilities management services about potential input tax errors. The template HMRC letter states that facilities management businesses do not always hold the contracts with service suppliers, and therefore may not be the recipient of supplies for VAT purposes. Where this is the case, the business would not be entitled to claim input tax. Businesses are asked to review their contracts and VAT recovery, correct any errors, and contact their Customer Compliance Manager (even if there are no errors), within 60 days. (Contact: Andrew Clarke)

Moving goods into Northern Ireland from Great Britain – ICS2

As reported previously in Weekly VAT News, HMRC were aware of readiness issues with implementation of the Import Control System 2 (ICS2), which is to be used by road and rail carriers moving goods into Northern Ireland or the EU from Great Britain to submit safety and security entry summary (ENS) declarations. The original date for the implementation of ICS2 was 1 September 2025, but HMRC have now advised that businesses that need more time to prepare will be able to continue to submit ENS declarations through Import Control System Northern Ireland (ICSNI) until 31 December 2025. (Contact: Donna Hemphill)

CJEU VAT case calendar

On 2 October, the CJEU will deliver its judgment in Svilosa a reference from Bulgaria on the concept of the supply of services and services supplied ‘free of charge’.

Dbriefs webcast

On Tuesday 30 September at 12.00, there will be a webcast on Navigating tax disputes with HMRC through to resolution. The webcast will discuss strategies for resolving disputes and case studies of complex disputes that have been resolved outside of litigation.